Sterling strengthened a bit against the dollar but was little changed against the euro on Monday, struggling to carve out a clear path amid the news that Dubai averted a possible debt default. There were no UK economic data reports to give the pound direction in a thin, pre-holiday market either, leaving the currency at the mercy of heavier flows in the euro and dollar.
The news of Abu Dhabi's $10 billion bailout for its fellow United Arab Emirate member Dubai initially boosted investors' appetite for riskier assets like equities and currencies, like sterling, that are more closely correlated with economic growth and a more buoyant financial sector. "Sterling initially rallied on the back of the Dubai news but failed to break above $1.6330 resistance, highlighting the underlying weak picture for sterling," BNP Paribas currency strategists said in a note on Monday.
At 1630 GMT sterling was up 0.2 percent on the day at $1.6280, almost a full cent up from the session low of $1.6190 but half a cent off its session high. The euro was little changed on the day at 89.95 pence, having earlier traded as high as 90.49 pence. The dollar slipped 0.3 percent against a basket of major currencies after Dubai said it had received $10 billion from Abu Dhabi to help it repay a $4.1 billion.