January 8, 2014 / 4:44 PM / 5 years ago

Sterling set for solid gains on euro in 2014, seen weaker vs. dollar - Reuters poll

LONDON (Reuters) - Sterling will make solid gains on the euro this year as Britain’s economic recovery forges ahead while a weak outlook for the 18-member bloc keeps the common currency in check, a Reuters poll found on Wednesday.

Sample polymer five and ten GB pound banknotes are seen on display at the Bank of England in London September 10, 2013. REUTERS/Chris Ratcliffe/pool

The pound is predicted to weaken slightly against the dollar as a relatively stronger recovery in the world’s biggest economy gives the Federal Reserve scope to further rein in its massive stimulus programme.

“Continued strong UK data and falling unemployment support the pound versus the euro ... although a dovish Bank of England may provide some offset,” said Anezka Christovova at Credit Suisse. “Cable is likely to retrace as part of the anticipated general dollar strength.”

One euro will be worth 82.8 pence in a month, 81.6p in six months and just 80.0p at year-end, according to the poll of more than 60 foreign exchange strategists taken this week.

The single currency was trading around a one-month low of 82.9p earlier on Wednesday and median forecasts have fallen considerably from just a month ago.

Sterling has been buoyed recently as markets have focused on a raft of upbeat data that has fuelled speculation the Bank will be the first major central bank to hike interest rates.

The Bank’s Monetary Policy Committee, which meets on Thursday, has pledged not to consider raising rates from a record low of 0.5 percent at least until unemployment falls to 7 percent.

Britain’s recovery has pushed firms to add headcount faster than had been expected, although a Reuters poll last week still did not predict a rise in the Bank Rate until the second half of next year at the earliest. <BOE/INT>

The U.S. Fed surprised many when it said in December it would begin winding down the $85 billion of bonds it has been buying every month from January, although it too is not seen raising interest rates until the second half of 2015. <FED/R>

One pound will be worth $1.64 in a month, $1.61 in six and $1.59 in a year, the poll found, with forecasts little changed from December. It was earlier trading around $1.64.

Polling by Shaloo Shrivastava and Hari Kishan; Editing by Susan Fenton

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