Sterling rose to within sight of a 1-1/2 month high against the dollar on Tuesday after stronger-than-expected industrial output data led to some cautious optimism that the UK economy may be able to evade recession. Gains were tempered however, by data showing the country's trade deficit widened more than forecast and some strategists said sterling's rise offered a good level to sell.
The pound hit a session high of $1.5326, near a 1-1/2 month high of $1.5364 hit on Friday when poor US jobs data knocked the dollar. It later pared gains to last trade up 0.3 percent on the day at $1.5301.
Technical charts showed resistance at the 55-day moving average of $1.5332, with market players citing offers in the $1.5325-40 area. "The data is relatively encouraging. There's enough there that, while we are far from in strong recovery phase, I would not get hung up on the idea of a triple-dip (recession)," said Jeremy Stretch, head of currency strategy at CIBC World Markets.
"That's providing a little bit of support for sterling, although any rallies up into the $1.5380 area are worth fading (selling into)."
The euro was close to flat on the day against the pound to 85.26 pence, holding above the 2-1/2 month low off 84.115 pence hit on April 1 Strategists said the single currency was enjoying some support from Japanese investors looking for higher-yielding assets abroad after the Bank of Japan unleashed aggressive monetary easing measures last week. Sterling hit a 3-1/2 year high against the Japanese currency on Tuesday of 152.07 yen, before paring gains to last trade at 151.54 yen.