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UPDATE 1-Sterling approaches two-week high with gains against dollar

reuters.com · 09/01/2021 11:21
UPDATE 1-Sterling approaches two-week high with gains against dollar

Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

Adds details, latest prices

- Sterling rose towards a two-week high versus the dollar on Wednesday, benefiting from a fall in the U.S. currency as investors bought into riskier assets.

The pound is taking it cue from other currencies this week, which is light on data and Bank of England speakers. It was last trading at $1.3784 GBP=D3, up 0.3% on the day and just below two-week highs reached on Tuesday of $1.3807.

Against the euro, the pound was also little moved, trading at 85.945 pence EURGBP=D3.

Last week's Jackson Hole symposium, at which Federal Reserve Chair Jerome Powell sounded a more dovish tone on the outlook for monetary policy than expected, led to selling in the dollar.

The greenback extended its drop on Wednesday as investors turned more bullish, buying equities and selling currencies such as the dollar which are viewed as safe havens.

Still, currency moves were small ahead of U.S. jobs data due at the end of this week.

Analysts said they saw little immediate movement coming in the pound versus the euro, which had strengthened on Tuesday after one European Central Bank policymaker was quoted as saying that it was in a position to think about dialling back its pandemic-era stimulus. nS8N2MM038

"There is still much doubt about what the ECB will do next (our team favours dovish settings retained), while the Bank of England is more formally looking to get the tightening cycle underway - probably in late 2022," analysts at ING said.

"A greater chance for EUR/GBP to break higher probably comes later in the month when extensions on Northern Ireland trade adjustments expire and the mood music between London and Brussels could deteriorate once again."

The Purchasing Managers Index survey for the manufacturing sector in August came in slightly better than earlier flash numbers. It confirmed that British factory output grew at the weakest rate for six months as supply chain problems weighed, but the pound was unmoved. nZRN002PAR

The Bank of England named Huw Pill, a former chief European economist at Goldman Sachs and ECB official, as its new chief economist. The BoE Monetary Policy Committee next meets on Sept. 23. nL8N2Q33F9

(Reporting by Tommy Wilkes; Editing by Emelia Sithole-Matarise and Alexander Smith)