Sterling edges higher after strong survey data

LONDON: Sterling edged up on Thursday after surveys showed Britain’s dominant services sector rebounded strongly last month, although investors remained reluctant to push the British currency much higher after its recent rally.

The pound also benefited from broad- based dollar weakness and a general rebound in risk appetite, which has lifted sentiment towards the British currency.

Persistent structural factors, such as a widening current account deficit, have kept investors wary, however.

“Looking at positioning data, inflation and a big current account deficit, sterling looks to be more of a sell than a buy at these levels,” said Hans Redeker, global head of currency strategy at Morgan Stanley based in London.

Sterling rose 0.3 higher at US$ 1.3551 and remained within striking distance of a four-month high of US$ 1.3659 hit in late September.

Long bets on sterling are hovering near their biggest levels in more than three years, according to the latest positioning data.

Some analysts said that the pound’s failure to move any higher after the survey findings suggested the pound’s recent strong showing may have been a little overdone.

“There could a pullback ahead given the fact that the recent gains were largely unsupported by any fundamental developments,” said David Cheetham, market analyst at XTB.

Britain’s dominant services sector grew unexpectedly quickly last month and businesses are more upbeat about 2018 than they were for much of 2017, but Brexit is weighing on investment plans, a survey showed on Thursday.

A near 3 per cent rally in sterling since a landmark European Union summit last month that moved Brexit talks to the next stage has made some investors more optimistic on the currency’s outlook in the coming weeks. — AFP