Sterling springs back

Sterling recovered from a 10-week low against the dollar on Thursday on confirmation that Britain's economy grew in the first quarter, although gains are likely to prove fleeting. Traders said the pound was also benefiting from the US dollar's fall as investors booked profits on its recent rally. Overall, however, the dollar's upward trend was intact after US Federal Reserve chief Ben Bernanke gave the first signs the bank could start unwinding its bond-buying programme.
With chances high that incoming Bank of England governor Mark Carney could push for aggressive monetary easing if UK data deteriorates later in the year, analysts said sterling was likely to underperform the dollar. The pound was buoyed by data confirming UK gross domestic product grew 0.3 percent in the first quarter, from the previous quarter, and 0.6 percent from a year earlier. "Obviously there are still question marks over the UK economy but today's GDP data didn't give investors anything fresh to worry about and helped sterling a bit ... we remain on hold as we wait to see what Mr Carney has to offer," said Simon Derrick, head of currency research at Bank of New York Mellon.
Sterling was up 0.2 percent at $1.5072, recovering from a 10-week low of $1.5014 struck earlier in the session. Despite the bounce, the pound has shed 0.8 percent this week and was susceptible to further losses below $1.50, traders said.
While sterling seemed to have regained some of its footing after Wednesday's fall due to an unexpectedly sharp drop in UK retail sales, it remained vulnerable to bets the Fed could pare back its stimulus programme. "With Bernanke signalling that quantitative easing could be tapered off and the US economy outperforming the other major economies, we expect the dollar to rally this year," said Craig Erlam, market analyst at Alpari.
While sterling gained against the dollar, it lost 1 percent against the safe-haven yen and Swiss franc. Both the yen and the franc are sought after during times of financial market stress.
Stock and commodities fell on Thursday as demand for riskier assets and currencies waned.
Stocks, in particular, have been underpinned in recent months by waves of central bank stimulus but they took a knock after Bernanke's comments on scaling back the Fed's $85 billion stimulus programme. Against sterling, the euro was up 0.3 percent at 85.67 pence, not far from Wednesday's one-month high of 85.90.