Pound clings to $1.40 on bullish British bets

By Reuters

<p><body> <p><span class="caps">LONDON</span> (Reuters) -The British pound held close to recent highs on Thursday, withstanding a wider sell-off that has knocked risk currencies.</p> <p>Sterling had risen above $1.41 for the first time since February on Monday, helped by dollar weakness, market relief over Scottish election results, lockdown easings and the Bank of England raising its economic growth forecast.</p> <p>Better-than-expected British <span class="caps">GDP</span> numbers on Wednesday also supported the pound, although a dollar rise after better-than-forecast U.S. inflation data sapped some of its recent rally.</p> <p>On Thursday, the pound fell 0.2% to $1.4028. The drop was modest given sharp falls in global stock markets and a deterioration in general investor sentiment.</p> <p>Against the euro, sterling weakened 0.1% to 86.035 pence.</p> <p>Analysts say a combination of a stronger UK economic rebound than expected and the belief that any Scottish independence vote is a long way off make the pound relatively attractive.</p> <p>“The better than expected March UK <span class="caps">GDP</span> yesterday underscored the bright outlook for the pound and the expected solid UK data this quarter should further support the currency,” <span class="caps">ING</span> analysts said in a research note. </p> <p>“We expect <span class="caps">EUR</span>/GBP to re-test the 85 [pence] level in the coming weeks. After the latest dip in <span class="caps">GBP</span> speculative positioning, sterling longs should start increasing yet again.”</p> <p><span class="caps">CFTC</span> positioning data showed that speculators reduced their net long position on the pound in the week to May 4..</p> <p>Sterling is the second best-performing G10 currency in 2021, helped by bets that Britain’s rapid vaccination drive will lead to a quicker economic rebound.</p> <p>The currency has also benefited from the Bank of England beginning to taper its bond purchasing programme, on the back of the improving economic outlook.</p> <p>Bank of England policymaker Jonathan Haskel said on Wednesday he was not too concerned about the medium-term inflation outlook in Britain, but would watch out for damage to the country’s productive capacity.</p> <p>British house price inflation hit its highest level since the late 1980s in April as buyers raced to take advantage of an extended tax break just as sellers retreated, a survey showed this week. </p> <p> (Reporting by Ritvik Carvalho and Tommy WilkesEditing by Gareth Jones, Barbara Lewis and Alexander Smith)</p> </body></p>