Sterling jumped against a weak dollar on Wednesday after US Federal Reserve chairman Ben Bernanke hinted at the possibility of more monetary policy easing if the economy weakens and inflation moves lower. The US currency fell broadly in response, pushing the pound up more than 1 percent to $1.6120, well above its 200-day moving average at $1.6045, with traders saying gains accelerated after it breached stop-loss orders at $1.6010.
This took it more than 3 full cents above Tuesday's five-month-and-a-half month low of $1.5781, hit when concerns about the eurozone debt crisis caused investors to shun perceived riskier currencies. Technical analysts said a close above the 200-day average could provide scope for further gains. However, sterling was weaker against the euro after data showing a sharp rise in the number of Britons claiming unemployment benefit added to concerns a faltering UK economy will ensure a prolonged period of record low interest rates.
The euro was up 0.3 percent at 88.10 pence, holding above a four-week low of 87.49 hit on Tuesday when concerns the eurozone debt crisis was spreading to larger countries such as Italy stung the single currency. The UK claimant count saw its biggest jump in two years last month, taking the total to the highest since March 2010.