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Sterling Consolidates above 1.38

LONDON, Feb 11(Reuters) – Sterling traded in recent ranges on Thursday, above the $1.38 mark hit earlier this week in relatively quiet currency markets owing to a Chinese holiday and a sparse data calendar.

Optimism over the speed of Britain’s COVID-19 vaccination programme compared to other countries in Europe and expectations of a weaker dollar this year have boosted the pound to nearly 3-year highs against the dollar and its highest since May 2020 against the euro.


A rally above $1.38 this week has made sterling the best-performing G10 currency of 2021, up 1.1% against the dollar and nearly 2% against the euro.


A post-Brexit trade deal with the European Union, and Bank of England comments that British banks would need at least six months to prepare for interest rates going below zero, have also boosted sterling.


Since the bank met last week, markets have pushed their expectation of negative rates out to February 2022.


Speculators meanwhile increased their long positions on the pound in the week to last Tuesday, CFTC data shows.


On Thursday, sterling traded 0.14% lower to the dollar at $1.3815, having hit a high of $1.3865 the previous day.


Against the euro, it was 0.14% lower at 87.73 pence, off a May 2020 high of 87.38 hit at the end of last week.


“GBP outlook for coming weeks is constructive and EUR/GBP is set to re-test the 87.50 pence level today,” said Petr Krpata, ING’s chief EMEA currency and interest rates strategist.


Investors had their eye on economic data in Britain.


A housing market upswing cooled sharply in January as Britain country went back into coronavirus lockdown and a tax break for buyers neared its expiry, a survey showed.


House price growth slowed more than economists polled by Reuters expected, and prices in London fell for the first time since July, the Royal Institution of Chartered Surveyors said.


Some 49% of British companies that export goods have run into difficulties caused by the shift in trade terms with the EU since Jan. 1, according to a British Chambers of Commerce survey, while one in five services exporters reported problems.


Reporting by Ritvik Carvalho; Editing by Kevin Liffey


Source: Reuters

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