Sterling rose on Tuesday, hitting a one-week high versus the dollar, as data showed inflation rose slightly more than expected in July, reducing the risk of more quantitative easing by the Bank of England. But with the UK economy fragile and UK interest rates still expected to stay at record low levels for a prolonged period, the pound's gains were limited, with analysts expecting it to stay within its recent ranges against the euro and dollar.
Annual inflation in Britain ticked up a little more than forecast in July to 4.4 percent, leaving open the possibility of a rise above 5 percent later this year which could prove a major obstacle to further easing measures. Attention on Wednesday will turn to the release of the minutes to the BoE meeting earlier this month.
"The BoE inflation report rekindled talk of more QE and today's inflation data is why there has been a bit of a correction in sterling, but it's not a massive move," said Audrey Childe-Freeman, currency strategist at J.P. Morgan Private Bank. Against the dollar, sterling was up 0.15 percent at $1.6412, having hit a one-week high of $1.6428 to leave it in sight of the August 8 peak of $1.6478.
The gains took the pound above pivotal resistance at $1.6378, the 61.8 percent retracement of sterling's April to July sell-off. The euro was down 0.45 percent at 87.71 pence, holding below its 100-day moving average at 88.21 pence. However, it was expected to remain above support at its 200-day moving average - currently at 86.67 pence - and the early August low of 86.44 pence. Technical analysts said the outlook for euro/sterling was negative while below the 55-day moving average at 88.37 and this month's high of 88.86.
Comments
Comments are closed.