March 15, 2010 / 9:35 AM / in 9 years

Sterling eases vs broadly firmer dollar

* Sterling down 0.6 percent at $1.5090 GBP=D4

* BoE’s Barker: may have quarter of negative growth

* UK polls point to indecisive election result

* Moody’s: UK’s AAA rating safe for now

LONDON, March 15 (Reuters) - Sterling eased against a broadly firmer dollar on Monday on concerns about the economic and political outlook, erasing gains made after U.S. ratings firm Moody’s said Britain’s sovereign rating was safe for now.

Sterling also fell nearly 0.5 percent against the yen GBPJPY=R as investors shied from riskier assets after Shanghai shares <.SSEC > ended 1.2 percent lower. London’s FTSE index was down 0.2 percent in early trade.

Comments by Bank of England policymaker Kate Barker in a regional newspaper saying the UK may have a quarter when gross domestic product falls [ID:nLAK002565] also hurt the pound.

But traders were wary of making big bets in either direction ahead of the U.S. Federal Reserve’s policy decision on Tuesday.

Market players expect the Fed to hold policy steady but will be looking for any further dissent from policymakers as the central bank pushes on with its exit strategy from extremely accommodative measures.

The market will also look to the minutes of the latest BoE meeting, due out on Wednesday, which are expected to show a decision to leave policy unchanged was unanimous.

The chief interest for the market would be in any hints of a resumption of asset buying after top officials said they would leave the door open for further quantitative easing.

By 0907 GMT, sterling fell 0.6 percent to $1.5090 GBP=D4. It hit a two-week high of $1.5218 late on Friday.

“Investors will likely remain cautious toward sterling,” said Geoffrey Yu, currency strategist at UBS.

Data on Friday showed currency speculators slightly trimmed net sterling short positions to 63,473 in the week ended March 9, from 67,549 the previous week. [ID:nN12100004]

Weekend opinion polls indicated an indecisive result in Britain’s upcoming election [ID:nLDE62D003].

Financial markets fear a minority or coalition government would be reluctant to take the strong action investors want to cut Britain’s budget deficit, forecast to reach 178 billion pounds this year, more than 12 percent of GDP.

Latest UK public spending data is due out on Thursday.

Moody’s said even if the election, expected in May, produced a hung parliament where no party has an overall majority, the UK could still cling on to its top-notch status.


“We suspect strongly that any government elected — even a hung parliament — would be ready to make adjustments to reduce the deficit,” Moody’s senior vice president Kristin Lindow told Reuters on Friday. “That’s behind our stable outlook, despite the extreme deterioration on the fiscal front.” [ID:nLAG006174]

Against the euro, the pound was down 0.3 percent at 90.91 pence <EURGBP=D4.

Traders were watching a meeting of euro zone finance ministers in Brussels, but expectations of no quick fix to Greece’s fiscal woes kept the euro pressured against the dollar.

Data on Monday showed the annual growth in asking prices for residential property in England and Wales slowed in March for the first time in a year after a glut of houses came on to the market, property website Rightmove said. [ID:nLDE62B1Z3]

Reporting by Tamawa Desai

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