(Recasts, adds new quote, updates prices)
* Graphic: Sterling and gilt yields bit.ly/2dgAXn1
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv
By Jemima Kelly and Patrick Graham
LONDON, April 27 Sterling rose 0.8 percent
against the euro on Thursday to trade at its strongest since
before Sunday's first round of France's presidential election,
when a victory for the market-friendly Emmanuel Macron drove a
surge in the single currency.
Its gains were largely due to broad weakness in the euro,
which fell across the board after European Central Bank
President Mario Draghi said policymakers did not discuss
removing the bank's monetary policy easing bias at this month's
The pound was trading around 84.26 pence per euro
by 1410 GMT, up from around 84.51 pence before
Draghi's press conference, as the euro fell on disappointment
that a pick-up in growth and inflation had not driven a broad
change of stance among ECB rate-setters.
"Euro bulls were disappointed with Draghi. They were looking
for something to cling on to," said ING currency strategist
Viraj Patel. "No one was really expecting a massive shift in
policy stance, but just something to say June is a live meeting
when it comes to signalling the end of QE."
Patel added that sterling - which outperformed the dollar
against the euro - had also been boosted by a speech by German
Chancellor Angela Merkel, who said the European Union would only
agree on future ties with London after they have nailed down a
deal to leave.
"There was speculation about Merkel saying a two-year
negotiation window looked a bit tricky, which fuels this
sentiment about a transition deal after the two-year Article 50
window is closed," he said.
Against the dollar, sterling climbed 0.3 percent to $1.2886
, helped too by polls showing Prime Minister Theresa May
on course for a landslide in the election she has called for
The pound rose by as much as 4 cents when May announced the
election nine days ago, but investors have looked unsure about
driving the pound higher in the days since.
Bank of America Merrill Lynch strategist Kamal Sharma said
May's lead in the polls had seen off any downward pressure on
the pound, leaving it clear to benefit from tax flows which
historically tend to push it higher in April.
"The impact of the election has diminished downside risks,"
he said. "That has largely played out in terms of its impact on
cable and now we are reverting back to the seasonal
Over the past 12 years, sterling has risen by an average of
2.3 percent every April. It is up around 2.5 percent for the
month so far.
Sharma cautioned that the pound tends to do less well in
May. "Our forecasts were for one final dip and then sterling to
gravitate towards some notion of fair value."
(Editing by Richard Lough and John Stonestreet)