Sterling gained against the euro and dollar on Tuesday as investors covered short positions after a spate of brighter UK economic data, but the outlook remained clouded by political uncertainty. Britain's economy grew 0.4 percent in the last three months of 2009, revised data showed, above forecasts for a 0.3 percent rise. Separate figures showed the UK current account deficit narrowed sharply in the fourth quarter.
"The data encouraged some players to cut their short sterling positions as there was no more negative news," said Paul Robson, currency strategist at RBS. Sterling rose to $1.5128, its highest in nearly 1-1/2 weeks, before falling back to $1.5104, up 0.8 percent on the day, by 1514 GMT. Traders said the next key resistance was at $1.5159, the 61.8 percent retracement of the entire March fall from $1.5382 to $1.4798.
Sterling's rise was briefly dampened after UK finance minister Alistair Darling said in testimony to parliament's Treasury Committee that depreciation of the pound had helped exports. Against the euro, the pound gained 1.1 percent to the day's high of 88.90 pence, helped by weakness in the euro stemming from fiscal concerns, traders said.
But most players did not see a sustained sterling rally in the near term given political uncertainty surrounding a general election expected in May. The latest opinion polls show a slight lead for the opposition Conservatives, but still point to a hung parliament where no one party holds a clear majority. Sterling was also supported after US ratings firm Standard & Poor's on Monday affirmed the UK's triple-A rating but maintained its negative outlook.
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