Sterling rose to a two-week high against the dollar on Thursday as risk appetite resumed and share prices gained. An improvement in British consumer confidence had pushed the pound sharply higher but it was kept in check by news that US automaker Chrysler would file for bankruptcy later in the day.
Data showing a fall in UK house prices also weighed on the pound. By 1530 GMT, sterling was up 0.4 percent at $1.4834, after touching $1.4949, the highest since mid-April. The dollar was flat against a basket of currencies, after hitting a more than three-week low of 83.885. Trade was extremely choppy, and exacerbated by month-end fund flows, traders said.
"Risk appetite had dominated price action ... and currencies reacted accordingly with the dollar selling off," said Christian Lawrence, currency strategist at RBC Capital Markets. "The pound was better bid following the release of stronger-than-expected data in consumer confidence." Expectations for month-end buying had also helped drive the pound higher.
Technical analysts said while sentiment had turned bullish, a sustained rise above $1.50 was needed to keep momentum going. British consumer confidence recovered to its highest level in a year in April as gloom over the economic outlook dissipated to levels not seen since the start of the crisis, a survey showed on Thursday.
The GfK/NOP consumer confidence barometer rose three points to -27 this month, its highest level since April 2008 and its third consecutive monthly rise. But separate data showed UK house prices resumed their slide in April. The average house price fell 0.4 percent on the month, partly reversing a surprise 0.9 percent rise in March, data from mortgage lender Nationwide showed. Prices were 15 percent lower than a year earlier and down a fifth from peaks set in October 2007.
Other figures showed house prices in England and Wales fell 16.2 percent on the year in March, taking values back to levels last seen in August 2004, the Land Registry said. The euro was down 0.3 percent at 89.45 pence. Sterling tumbled earlier in the week on concerns about a potential economic fallout from swine flu and the US banking system ahead of the results of the US government's "stress test" due out next week. The World Health Organisation said on Thursday it had raised its alert level to phase 5, the last step before a pandemic.