Tuesday, 27 October 2015 00:25
LONDON: Sterling climbed off a 12-day low against the dollar on Monday, as weaker-than-expected US home sales data dented the greenback.
Having recorded its best week since May, the dollar index dipped 0.3 percent, weighed down by September new homes sales figures that revived concerns about the US economy.
The British pound rose as high as $ 1.5383 after the data, having earlier touched $ 1.5305, its weakest since Oct. 14.
It last traded at $ 1.5364, up 0.3 percent on the day.
Sterling has traded in a range of $ 1.51 to $ 1.55 since late September.
The US Federal Reserve, which meets later this week, and the Bank of England were the two major central banks seen as most likely to raise interest rates this year.
However, bouts of weak data has seen expectations of higher rates from both pushed back.
“Whether cable is going up or down very much depends on whether expectations of UK or US rates are blowing hot or cold.
It’s very data dependent,” said Jane Foley, senior currency strategist at Rabobank in London.
The Bank of England is expected to follow the Fed in hiking rates.
A Reuters poll of economists on Monday saw the first BoE hike in the second quarter of 2016.
Bank of England Governor Mark Carney said in a newspaper interview over the weekend that although households should prepare for higher rates, these were not guaranteed.
His remarks had little impact on the pound. Data on Monday showed UK factory orders posted their biggest fall in three years in the three months to October.
Against the euro, sterling held close to the two-month high it hit last Thursday after European Central Bank President Mario Draghi said the bank was studying new stimulus measures that could be introduced as soon as December.
Having made its biggest weekly gains against the euro since July last week, sterling edged down less than 0.1 percent to 71.95 pence per euro.
“What Draghi has done is make the market face up to the fact that there is still an interest rate differential which is likely to be in sterling’s favour,” Foley said. On Tuesday, UK growth data for the third quarter will be watched for the latest clues on the British economy.
“Given the strong industrial production for August and the much-better-than expected retail sales for September, we see the likelihood for a positive surprise rather than a slowdown,” IronFX strategists wrote in a research note.
