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Sterling edges up as euro zone concerns eclipse worries over UK data

Thursday, February 23, 2017 - 21:23

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Sterling inched up against the dollar and euro on Thursday, helped against the latter by a poll that added to growing concerns over the outcome of French presidential elections in April and May.

[ LONDON] Sterling inched up against the dollar and euro on Thursday, helped against the latter by a poll that added to growing concerns over the outcome of French presidential elections in April and May.

The pound rose around 0.1 per cent against the US dollar in morning trade in London, trading at US$1.2456 by 1128 GMT, while gaining 0.2 per cent to 84.66 pence per euro.

Concern that the British economy is finally showing the signs of strains predicted since last year's vote to leave the EU have pressured the pound off and on over the past fortnight, and data on Wednesday showed a fall in business investment in the fourth quarter.

But there is also growing nervousness about political stability in Europe, with worries that far-right, anti-EU leader Marine Le Pen could yet win the presidency weakening the euro.

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A poll overnight showed Le Pen only 10 points behind conservative Francois Fillon but 22 points behind centrist Emmanuel Macron, in the potential second-round run-offs due in May.

Sterling traded at less than 84 pence per euro for the first time since Dec. 21 on Wednesday.

"I think euro-sterling in particular will continue to be affected more by the European political situation, in particular the French election," said Alvin Tan, a currency strategist at Societe Generale in London.

"I can imagine there could be some movement probably downward in euro-sterling driven by euro, but hard pressed to see any major drivers of sterling for today in the short-term given the lack of data."

Some analysts said the relative stability of sterling in the past month, after falls throughout December and the first half of January, may preface stronger gains in the weeks ahead.

"When prices are compressing and consolidating for a significant period of time, statistical tendency generally dictates that a period of price expansion will follow," said Jamie Dutta, a senior market analyst at Faraday Research.

He said sterling faced strong resistance at US$1.2580, but once it breaks through that level it should make solid gains.

REUTERS

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