Sterling rose broadly on Thursday as investors took profits on the pound's tumble after the UK's annual budget, although gains were capped by caution about the nation's increasingly grim public finances. Some traders took advantage of the pound's fall to a three-week low the previous day to buy the UK currency.
But few were willing to be very optimistic on sterling after a slightly bigger-than-expected fall in UK factory orders highlighted ongoing weakness in the nation's economy. In the 2009/2010 budget, presented on Wednesday, finance minister Alistair Darling revealed Britain will run a budget deficit of 12.4 percent of GDP and have to issue a record 220 billion pounds of gilts for the fiscal year.
"Sterling had a tough time principally because of the budget looming and now the budget's out of the way people are inclined to buy it again," said Daragh Maher, deputy head of foreign exchange research at Calyon in London. The fall in British factory orders slightly slowed in April from the previous month, though April's fall in order balances to -57 was still more than analysts' forecast of -54.
At 1512 GMT sterling was up 1 percent at $1.4618 against the dollar. Sterling fell to $1.4397 on Wednesday, its lowest since early April on Darling's announcement the economy would contract at its fastest pace since World War Two. The euro dropped 0.7 percent to 89.169 pence, having touched 89.99 pence in earlier trade, its highest in more than a week. Finance ministers of the G20 group of top developed and developing countries meet on Friday in Washington, but Darling suggested that currencies may take a back seat to issues involving broader economic growth.