* Sterling rises past stops to hit one-month high vs dollar
* Long positions could be threatened by soft UK data
* Real money investors cited as buyers of sterling
By Philip Baillie
LONDON, Dec 4 Sterling struck a one-month high
against a broadly weaker dollar on Tuesday as reported buying by
long-term investors helped it shake off a weaker-than-forecast
UK construction PMI reading.
The data, showing British construction activity shrank
slightly in November and that confidence about the next 12
months fell to its lowest in almost four years, was a blow to
the government the day before finance minister George Osborne's
mid-year budget statement.
However, sterling barely reacted. Later it hit a
one-month high of $1.6130, its highest level since Nov. 2, after
triggering stop-loss buy orders just above $1.6120. Reported
option barriers at $1.6150 were likely to check near-term gains.
"Sterling looks fully-valued up at these levels unless we
see further topside impetus given by the services PMI on
Wednesday," said Jeremy Stretch, head of currency strategy at
CIBC World Markets.
"Sterling is holding up but I would not want to chase it
much higher. We had been seeing risk sentiment better in the
morning that might have helped sterling/dollar."
A Reuters poll for the services PMI forecasts a reading of
51.1 for November, showing a slight pick-up in growth compared
with 50.6 the previous month.
Earlier on Tuesday, data showed British retail sales edged
up in November, though by less than analysts were expecting.
Investors will focus on what Osborne will say in his "autumn
statement" in parliament on Wednesday. There is speculation that
he is likely to miss his debt and growth targets, raising risks
to Britain's triple-A credit rating.
"We tend to be seeing more of the same from Osborne, it is
probably going to increase speculation around the AAA credit
rating," said Richard Driver, analyst at Canton FX.
"Growth is going to be poor in the fourth quarter which is
bringing the rating agencies into play. More of the same is not
necessarily good for sterling."
The pound was flat against the euro, with the shared
currency at 81.04 pence, just off the five-week high
of 81.325 pence it posted last week.
The euro gained broad support from better-than-expected
terms for a Greek debt buyback, announced on Monday, although
gains against the pound were expected to be limited.
Some analysts said the European Central Bank's news
conference on Thursday might prompt euro/sterling to grind lower
if the bank revises down its view of euro zone growth.
"The euro could lose rate advantage across the board if
market expectations of a rate cut grow following the ECB press
conference," Citi strategists told clients in a note.