Sterling gains vs dollar on UK data, seen short-lived
LONDON, July 10 |
LONDON, July 10 (Reuters) - Sterling rose to a session high against the dollar on Tuesday after better-than-expected UK production figures offset downbeat retail sales and housing data, although analysts predicted the pound's gains would be short-lived.
British manufacturing output rose 1.2 percent month-on-month in May and industrial production increased by 1 percent from April, well above analyst estimates.
The pound was up 0.1 percent on the day at $1.5538, having hit a high of $1.5550 after the data.
"Given that the (macroeconomic) outlook has deteriorated significantly in May and June, we don't think the data will make too much of a difference," said Geoffrey Yu, currency strategist at UBS.
"We prefer to sell into this rally and head back towards $1.54 or lower," he added.
The UK production rise was attributed to an extra work day due to the end-of-May national holiday being postponed until early June to mark the Queen's Diamond Jubilee celebration.
But Jens Larsen, chief European economist at RBC Europe, warned that the resulting loss of two working days in June would have a much larger offsetting impact on the economy.
"The pattern in the Golden Jubilee year was a very weak June in 2002, partly offset by a stronger May and July," he said in a note to clients, referring to a similar situation 10 years ago.
There had been more bearish figures overnight, British retail sales rising 1.4 percent in June, far below the 2 percent estimated by analysts, and UK house prices down more than expected.
RETREATS VS FIRMER EURO
Against the euro, sterling retreated from a 3-1/2 year high hit on Monday after reports that German Finance Minister Wolfgang Schaeuble said instruments to tackle the debt crisis could be used without prior announcement.
This lifted the euro and caused Spanish and Italian government bond yields fell.
The news came after a late night meeting of euro zone finance ministers on Monday that made little progress towards using the bloc's rescue funds to combat soaring Spanish and Italian borrowing costs.
Looking forward, the market will scrutinise minutes from last month's meeting of the U.S. Federal Reserve, to be published on Wednesday.
Any indication the Fed may opt for another round of asset buying before the end of the year is likely to weigh on the dollar versus sterling. (Reporting by Michael Szabo; Graphics by Scott Barber; editing by Patrick Graham)
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