Forex News

Sterling recovers from recession hit to 7-mth dollar high

27 April, 2012 - Reuters
Adds quote, detail, updates prices)
  • Sterling rises to $1.6208 versus weaker dollar
  • Pound shrugs off contraction in UK economy
  • But economy still fragile, pound's gains may be limited
  • BoE's Weale says GDP disappointment strengthen QE case
  • By Jessica Mortimer

    LONDON, April 26 (Reuters) - Sterling hit its highest level in more than seven months against a weaker dollar on Thursday after policymakers in the United States kept open the option of more monetary easing.

    The U.S. mood outbalanced any residual concern about Britain entering recession.

    The pound also matched a two-and-a-half-year high against a basket of currencies as it recovered from losses the previous day when data showed the UK economy contracted again in the first quarter of 2012.

    Analysts said recent data and surveys have shown signs of improvement in the UK, limiting the impact of the recession news and keeping up sterling's popularity as an alternative to a troubled euro. A survey by lender Nationwide showed UK consumer confidence rose to a nine-month high in March.

    Sterling rose to $1.6208 , its strongest since early September last year, before easing back to $1.6188.

    "Sterling has shown a remarkable resilience, having more or less totally shrugged off the GDP numbers," said Richard Wiltshire, chief FX broker at ETX Capital.

    "The feeling is that although the UK data was disappointing it will not hamper the medium term picture."

    The dollar fell broadly after U.S. Federal Reserve Chairman Ben Bernanke said on Wednesday that the central bank may launch another round of bond purchases if the economy weakened.

    The euro was flat for the day at 81.75 pence as it edged back towards its recent 20-month low of 81.43 pence after rising the previous day in the wake of the UK gross domestic product data.

    Investors remained wary of the euro due to concerns about debt problems in Spain and other euro zone countries and political uncertainty in the Netherlands and France.

    But traders reported option related euro demand and also corporate bids placed below 81.50, however, which may limit the euro's falls in the short term.

    Sterling's trade-weighted index rose to 83.3 , matching a level hit on Tuesday which was its highest since August 2009.

    FRAGILE RECOVERY

    Sterling has been performing well since Bank of England minutes last week reduced the chances of more monetary easing in the UK in May.

    "A less dovish BoE continues to provide important support for sterling with the growing UK interest rate advantage against the U.S. and euro zone seemingly unharmed by the disappointing GDP data," said Valentin Marinov, head of European G10 FX Strategy at Citi.

    Some analysts believe the UK economy is on the road to recovery and first quarter GDP figures may be revised up. Others, however, warn it remains fragile, particularly given its strong trading links to the euro zone and say this may limit the pound's scope for gains.

    The prospect of more quantitative easing cannot be ruled out, with BoE Monetary Policy Committee member Martin Weale saying on Thursday that the GDP figures were a disappointment and strengthen the case for more QE.

    A Confederation of British Industry retail sales survey on Thursday was mixed, showing UK retail sales fell slightly more than expected in April although stores reported the strongest outlook for more than a year.

    Additional reporting by Neal Armstrong.Editing by Jeremy Gaunt.)

    Copyright Thomson Reuters 2012. All rights reserved.

    The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.

    Currency Converter


    Market Rate For informational purposes only. Terms of Use
    For details, see My FX Dashboard
    Rate: 1.6791
    =
    Rate: 0.5956
    =
    For UKForex’s customer rate
    Log In or Register Now

    Register Free

    Send money overseas at better rates than the banks.

    Get Started & Register
    Already registered? Login

    Get our free commentary

    Stay on top of the news with updates from our expert dealers on the latest currency movements. You can unsubscribe any time and your email address is safe – see our >Privacy Policy.


    Keep me up to date:

    Get free rate alerts

    /
     
    Choose currency pair and enter the exchange rate. An alert will be triggered when the exchange rate is reached and an email will be sent to you. You can unsubscribe any time and your email address is safe – see our Privacy Policy.
    NOTE: These rates are for informational purposes only.

    IMPORTANT: Use of this website is subject to the Website Terms. Use of the Services of the UKForex Limited is subject to the Client Agreement. Nothing on this website constitutes or should be construed as financial advice. This information has been prepared for distribution over the internet and without taking into account the investment objectives, financial situation and particular needs of any particular person. UKForex Limited makes no recommendations as to the merits of any financial product referred to in this website, emails or its related websites.

    DISCLAIMER: UKForex makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this web site. Read full disclaimer.

    UKForex provides foreign currency transfer services to private clients and business customers. Use our free currency converter, exchange rate charts, economic calendar, in-depth currency news and updates and benefit from competitive exchange rates and outstanding customer service.

    UKForex is regulated by the Financial Conduct Authority (FRN: 521566) for the provision of payment services.

    Money Laundering Regulation Number (MSB): 12219180. Issued by HM Revenue & Customs (HMRC)
    Read our Money Laundering Statement