April 9, 2018 / 9:17 AM / in 4 months

Sterling rises after dollar falls and upbeat housing data

LONDON (Reuters) - Sterling climbed against the dollar and the euro on Monday, boosted by data showing British house prices rose more than expected in March and after the greenback slipped to a six-day low.

British five pound banknotes are seen in this picture illustration taken November 14, 2017. REUTERS/Benoit Tessier/Illustration

Economists expect the Bank of England to raise interest rates in May to help curb inflation, which has risen above target since Britain’s vote to leave the European Union in 2016 sent sterling plummeting.

That assumption, along with a weak dollar and a transition deal Britain signed last month to cover a 21-month period after it leaves the bloc, have seen the pound claw back some of those losses.

Sterling on Monday was on track for a third consecutive day of gains and changed hands as high as $1.4163, up half a percent. It traded at $1.4134 at 1705 GMT.

Earlier, data from mortgage lender Halifax showed UK home prices rose by a stronger-than-expected 2.7 percent in the first three months of 2018.

“(This) ...is a welcome piece of news given that one of biggest concerns after Brexit is how UK households will deal with falling house prices,” said Valentin Marinov, head of G10 FX strategy at Credit Agricole.

Marinov said he had a moderately constructive view on the pound for 2018 and that, with Brexit concerns on the back burner, sterling could start to outperform a range of currencies, as opposed to only the dollar, which has been weakened by U.S.-China trade war fears.

“It looks like sterling is starting to stabilise with the currency maintaining a tight range in recent days above the $1.4 level,” said Eric Theoret, a currency strategist at Scotiabank.

He pointed to the strong historical performance of the pound in April, when it tends to rise versus the dollar as foreign companies send dividend payments to British shareholders.

Many investors are focusing on economic data to try to gauge whether Britain can stomach more than one rate hike in 2018.

But some analysts say deep uncertainty surrounds Brexit negotiations and that could deter the BoE from tightening policy.

Against the euro, the pound traded up 0.1 percent on Monday at 87.14 pence per euro after hitting a day’s high of 86.98 pence.

The latest positioning data shows long sterling among the largest futures positions held by leveraged accounts among the G10 currencies, according to a note by BMO Capital Markets.

Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv

Editing by John Stonestreet

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