Sterling fell on Friday with activity thinned by a US holiday and by nervousness ahead of Greece's referendum on accepting or rejecting international creditors' conditions for aid. The pound, which has gained in six of the eight weeks since Britain's May elections but has struggled to push on in the past two, touched an intraday high after data showed the services sector grew more than expected last month.
But like other major currencies, traders said any sense of clear direction has disappeared in the past week alongside uncertainty over whether Greece what might be a step towards leaving the euro. Retail trading platform FXPro's head of market analysis, Angus Campbell, said sterling would be among the currencies under pressure on Monday if Greece votes 'No' on Sunday.
"Either way I think the dollar will be attractive," he said and played down the impact of investors shifting money out of euro assets and into UK gilts in search of safety from any sell-off. "At the end of the day the euro zone is our main trading partner, so sterling is one of the currencies at risk of suffering from a shock from Greece," he said. Sterling rose to $1.5649 after the services data, but was back at $1.5601 by 1530 GMT, flat on the day. Against the euro, it was 0.3 percent weaker at 71.095 pence.
"The looming referendum just puts a dampener on absolutely everything because I don't think people really want to make any significant decisions ahead of that on almost anything - it's better to sit on your hands and wait and see what unfolds," Bank of New York Mellon's head of FX research, Simon Derrick, said. A purchasing managers' index (PMI) of private-sector services rose by 2 points in June to 58.5, topping all forecasts in a Reuters poll and staying comfortably above the 50 mark that divides growth and contraction.
The data followed Thursday's better-than-expected British construction survey, which showed activity grew at its fastest rate in four months in June, and confidence in the sector surged to an 11-year high after a lull before May's national election. But this week, the Bank of England's chief economist, Andy Haldane, said the bank should steer clear of an early interest rate hike, and warned of a strong pound's effect on growth.
And Markit, which runs the PMI surveys with CIPS, said the recovery looks increasingly unbalanced. Growth in British manufacturing declined to its lowest in more than two years last month, according to its survey on Wednesday. "The consumer-driven recovery is unbalanced and can be undone by the next cyclical downturn in the economy when confidence drops back," CMC Markets analyst Jasper Lawler wrote in a research note.
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