| LONDON, July 10
LONDON, July 10 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
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
"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
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)