LONDON, Sept 6 Sterling rose to trade near a
7-week high against the dollar on Tuesday, amid expectations
that Britain had probably dodged a recession in coming months
with the economy showing signs of resilience in the aftermath of
the shock Brexit vote.
The pound also hit a four-week peak against the euro, with
sentiment bolstered by the recent slew of robust data that has
lessened the chances of further monetary easing by the Bank of
On Monday, the Purchasing Managers' Index (PMI) for the
dominant services sector showed the biggest one-month gain in
the survey's 20-year history, beating all forecasts in a Reuters
poll. The survey echoed the upbeat tone of data released last
week on the manufacturing and construction sectors in August and
bolstered a view that the economy was holding up well so far.
Sterling rose 0.3 percent to $1.3345, not far from
a peak of $1.3376 struck on Monday, its highest since mid-July.
The euro fell 0.25 percent to 83.54, its lowest since early
August and the broader sterling index was near its highest since
"Sterling may squeeze up a bit more but many investors will
see this a chance to sell - it would be a surprise if it managed
to get through $1.35, before falling again," said James Binny,
EMEA Head of Currency at State Street Global Advisors.
"Sterling is seen as slightly cheap on long-term valuation
type measures - but it will be a while until that feeds through
to allow it to rise again, and is unlikely to happen this year."
Speculators have trimmed record high bets against the pound
in the week ended Aug. 30 and analysts said if investors roll
back expectations of further monetary easing in coming months,
sterling could advance further.
The Bank of England cut rates to near zero early last month
and launched an asset purchase to cushion the economy from the
shock decision to leave the EU.
On Monday, Morgan Stanley economists raised their growth
forecasts for the United Kingdom and adjusted their BoE easing
call, delaying the next tranche of asset purchases to Feb 2017.
"Rate differentials have moved in favour of the pound and,
with the market heavily short-positioned, we see further
tactical upside potential, with long sterling/yen remaining our
best call," Morgan Stanley strategists said in a note, adding
for the longer term, the outlook for sterling remained bearish.
(Reporting by Anirban Nag and Patrick Graham; editing by