Sterling hovered near a two-and-a-half month high versus the dollar on Thursday, supported by a cautiously optimistic outlook for riskier currencies and data from the UK which pointed at growth in the construction and manufacturing sectors.
Dealers, however, said persistent worries over the UK economy and the likelihood that the Bank of England will announce an increase in its asset purchase programme next week were likely to keep the pound in check, with data from the dominant service sector awaited on Friday.
The pound was trading flat for the day at $1.5834 after rising to $1.5884 on Wednesday, its highest since November 18. Resistance was the 200-day moving average which has not been breached since late October at $1.5952, while bids were seen at $1.5800/1.5780.
"The cyclical data bodes well for global growth and sterling is increasingly correlated with global growth prospects because of its reliance on exports," said Raghav Subbarao, currency strategist at Barclays Capital. Alejandro Zambrano, market strategist at FXCM said most speculators and retail investors were running large bearish positions on the pound, and as such sterling could bounce in the near term if it held above $1.58.
The euro was flat on the day at 83.13 pence, roughly in the middle of this year's 82.22-84.09 range. Bids were highlighted by traders at 82.80 with offers at 83.45/50. The euro was given a lift by dovish comments from US Federal Reserve chief Ben Bernanke, although fresh worries about Greece was likely to cap gains.
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