Sterling rallied to a six-month high against a broadly weaker dollar on Monday, lifted by buoyant risk appetite and higher British share prices on the back of solid earnings from UK bank HSBC. The UK currency climbed to its strongest in nearly a month against the euro, which helped to push it to its highest against a currency basket since September last year.
By 1505 GMT, sterling had climbed 1.3 percent on the day to $1.5898, its strongest since early February. The pound extended gains after it closed above its 200-day moving average around $1.5542 on Friday, while making a clear break of $1.5636, the 50 percent retracement of its peak-to-trough move between AAugust 2009 and May this year Technical analysts said the pound's next target was $1.5870, the 61.8 percent retracement of the November 2009-May 2010 fall. The euro fell 0.5 percent to a four-week low of 82.64 pence, before pulling back to 82.95 pence. Sterling's rise versus the euro helped to lift the pound trade-weighted index to 82.7, its highest since September 2009.
But euro losses were limited, as it rallied against the dollar, breaking through a key technical level around $1.3125. Sterling benefited as the dollar came under pressure on concerns the US economy is losing steam after below-forecast growth data last week. The latest CFTC data shows speculators increased net short dollar positions and reduced bets against sterling in the latest week.