LONDON, Sept 22 Sterling rebounded from a
five-week low against the dollar on Thursday, boosted by renewed
weakness in the greenback after the Federal Reserve kept
monetary policy steady and projected a less aggressive path for
rate hikes in coming years.
While the Fed strongly signalled it could tighten monetary
policy by the end of the year, policymakers cut the number of
rate increases they expect this year to one from two. That put
pressure on the dollar and helped relieve some of the
selling that the pound had witnessed this week.
Sterling was up 0.3 percent at $1.3071, bouncing
from a five-week low of $1.2946 struck on Wednesday. That low
was not far from a three-decade trough of $1.2798 struck in
early July, shortly after Britain's shock vote to leave the
The euro was flat against the pound at 85.93 pence
, not far from a one-month high of 86.31 struck
earlier this week.
Investors will now focus on a speech from Bank of England
chief Mark Carney in Berlin. Earlier this month, in a testimony
to lawmakers he kept the door open for more monetary easing,
despite recent UK data surprising on the upside.
"We will be looking for signs on whether he thinks there is
need for another rate cut soon," said Hans Redeker, head of
currency strategy at Morgan Stanley. "A key level to watch to
the upside for sterling/dollar is the 50-day moving average at
Traders said gains in sterling are likely to be limited as
worries over Britain's exit from the EU and its impact on the
economy have firmly come back on investors' radar.
Late last week, sentiment towards the currency soured on a
media report that said UK Chancellor of the Exchequer Phillip
Hammond was ready to give up access to the single market to
achieve immigration restrictions during the Brexit negotiations.
Analysts said the lingering uncertainty is likely to force
the Bank of England to remain dovish and weigh on the currency.
"The central bank's policy stance is strongly linked to
Brexit-related long-term uncertainty," analysts at Credit
Agricole said in a note. "This in turn continues to limit
sterling upside from here."
(Reporting by Anirban Nag; Editing by Andrew Heavens)