Sterling snapped a four-day drop against the euro after some investors judged the selling of UK’s currency was overdone.
Sterling also rose against the dollar, overlooking data that showed consumer spending in the UK rose less than forecast, reining in growth in the economy. The euro slid against sterling after its relative strength index climbed above 70, a threshold that is deemed as overbought on technical charts.
Gilts pared losses after UK household expenditure rose 0.1 per cent in the second quarter, one-third the median forecast of economists in a Bloomberg survey.
The economy grew 0.3 per cent in the period, matching an initial estimate. “The breakdown of growth was unfavourable for sterling, with consumption slowing markedly,” said Lee Hardman, a foreign-exchange strategist at MUFG in London.
“The modest pound rebound could just reflect that it has been heavily sold recently.”
Weekly gain
The euro fell 0.4 per cent to 91.9 pence as of late morning in London, paring its advance this week to 0.6 per cent. The common currency is still headed for a fourth consecutive weekly gain against sterling, trading at 92.1 pence at 3.30pm.
On the day, sterling traded 0.2 per cent higher at $1.2827.
The yield on 10-year gilts was little changed at 1.07 per cent. Some investors suggested that investors could be positioning ahead of the Federal Reserve’s two-day symposium that begins in Jackson Hole on Thursday.
“I would concentrate on the downtrend that has been in place since the start of August, and still is,” in sterling, said Stuart Bennett, head of Group-of-10 currency strategy at Banco Santander.
"The pop higher could be pre-Jackson Hole positioning or levelling positions ahead of a long weekend." The UK's financial markets are closed on Monday for a holiday. – (Bloomberg)
