(Updates prices, milestone, adds new quote)
By Ritvik Carvalho
LONDON May 17 Sterling hit its highest in
almost eight months on Wednesday, briefly threatening to pass
$1.30 as doubts about U.S. President Donald Trump's political
future weighed on the dollar.
The pound rose back to the top of the past month's range
versus the dollar, bouncing to as high as $1.2991 as risk
aversion intensified in the London afternoon.
It spent most of the day hovering near $1.2950 after an
initial dip following UK wage and jobs numbers before retreating
to $1.2942 by 1600 GMT, still up 0.2 percent on the day.
Against the euro the pound was flat, recovering from its
weakest levels in five weeks, trading at 85.79 pence per euro.
The dollar has weakened on reports that Donald Trump
disclosed classified information to Russia's foreign minister
and asked then-FBI Director James Comey to end his agency's
investigation of former National Security Advisor Michael Flynn
Both cast doubt on how effective his administration could be
now and spurred investors to rein in the expectations for higher
inflation and a stronger dollar with which they greeted the new
administration last year.
"This does not yet spell the end of Trump, but what it does
mean is twofold: the market’s pricing of Trump’s being able to
get anything through Congress is diminished further and ...
impeachment now creeps ever so slightly into the markets,"
Nomura strategist Jordan Rochester said.
Some analysts pointed to higher-than-expected growth in
employment and a dip in the jobless rate for the first quarter
as a positive signal for sterling as it struggles to break
But while wage growth - long a missing ingredient in
Britain's economic recovery - came to 2.1 percent, that was
still slower than inflation and only around half the pace of the
years before the 2008 financial crash.
"The wage numbers are the big story and they confirm the
fact that we are in obviously a squeeze for consumers," said
Christopher Beauchamp, market analyst at IG Markets.
"Of course you're not seeing completely much of a negative
reaction in the pound because I think a lot of this is dollar
weakness now. You've seen an unravelling of that side of the
He and others in the market have pointed to the willingness
of companies to hedge at current rates, locking in gains made
since the announcement last month of a June 8 parliamentary
That points to concerns that the pound will struggle to get
any higher during 18 months of talks on the terms of Britain's
departure from the European Union.
Bullish investors, however, point to robust British consumer
spending and growth over the past year and to the upward
pressure that higher inflation may put on interest rates and the
idea that Brexit risk is now largely priced in.
"Stability is the word for sterling at the moment," said ING
currency strategist Viraj Patel.
"We have some short-term bullish momentum but until you take
away that longer term uncertainty, we are not going to get much
(Editing by Larry King)