* Trade-weighted pound highest since mid-Feb 2011
* Euro/sterling near 3-month low, barriers at 82 pence
* Improving UK data supports sterling
LONDON, April 11 Sterling rose to its highest in
14 months against a trade-weighted basket of currencies on
Wednesday, bolstered by improving UK data and with the pound
pinned near a three-month high against the euro.
Worries about the euro zone debt crisis took centre-stage as
Spanish 10-year bond yields pushed higher, prompting investors
to switch to the UK currency which is still considered
relatively safe in comparison to the common currency.
The pound was supported by data that showed British retail
sales rose in March at their fastest pace so far this year. The
British Retail Consortium said like-for-like retail sales rose
by an annual 1.3 percent in value terms, easily beating
expectations of a stagnant performance.
That came a day after figures showed UK house prices
declining at their slowest pace since June 2010 in March. All of
this added to signs that the UK economy was slowly recovering
and the Bank of England would not have to resort to more
"We have had some better UK data today, yesterday and the
past week, giving reason for sterling outperformance," said Jane
Foley, senior currency strategist at Rabobank.
"But the real trigger will be how the euro performs against
the dollar and if Spanish concerns intensify and the euro tests
the lower side of its recent range against the dollar, then
euro/sterling could come under more pressure."
The euro was at 82.415 pence,, not far from
82.30, its lowest level since early January, with strong support
seen around the Jan. 9 low of 82.22 pence. There is significant
buying interest from companies around 82.00 pence with an option
barrier also cited there, traders said.
Analysts said sterling was benefiting from safe
haven-related flows from the Middle East and this was likely to
help it against the euro.
On a trade-weighted basis, the pound rose as high as 82.3
, its strongest since mid-February 2011, Bank of England
Against the dollar, sterling was up 0.2 percent at
$1.5900 with near-term resistance at $1.5934, the 50 percent
retracement of its fall from $1.6063 on April 2 to a low of
$1.5805 on April 5.
It has bounced off those pre-Easter lows, supported by
recent data that has shown a marked improvement in UK services,
construction and manufacturing sentiment, fuelling hopes the
country could avoid slipping into recession. That contrasted
with euro zone PMI surveys which highlighted a contraction in
As a result, interest rate spreads between safe-haven
10-year UK gilts and German Bunds have narrowed
slightly this week, giving sterling an additional boost.
Part of the tightening has also been due to expectations
that the Bank of England is unlikely to resort to more
quantitative easing soon. QE involves printing money to
stimulate growth and can crimp demand for a currency.
But analysts said overall appetite for sterling could fade
if global risk sentiment suffers in coming days with risk-averse
investors likely to choose the safe-haven yen and the U.S.
Stocks have suffered in recent sessions as Spain's funding
problems returned to the fore, adding to jitters about the
health of the global economy after Friday's disappointing U.S.
"Challenges to global risk appetite and increased asset
market volatility will work against sterling, in our view,"
Morgan Stanley strategists said in a note.
(reporting by Anirban Nag; editing by Stephen Nisbet)