Stg slips from 3-wk highs against dollar

LONDON: Sterling slipped from three-week highs against the dollar on Tuesday as investors cashed in profits after UK inflation came in higher than expected and the greenback got a boost from strong US data. US retail sales and producer prices rose slightly more than forecast in November, implying faster economic growth.

Earlier in the session, selling by a UK clearer in the pound/Australian dollar cross pushed sterling lower across the board, though thin trading volumes exaggerated price swings, market participants said. Sterling was last down 0.57 per cent at $1.5766 after rising above $1.59, its highest since Nov. 23, shortly after the November inflation figures, which reinforced a view the Bank of England was unlikely to print more money to add stimulus to the economy.
“The markets were taking profit off that (high),” said Geoffrey Yu, currency strategist at UBS. “There’s always large flows at this time of year, which given thinning markets ahead of the holiday break, tend to lead to whippy price action,” said Paul Robson, currency strategist at RBS.
“The overshooting CPI inflation, other things being equal, you’d expect that to be positive for sterling.”
Sterling also fell against the single currency, with the euro last up 0.5 per cent at 84.84 pence, breaking through stops around 84.80 pence.
Commerzbank analysts said in a note the single currency could next target its 200-day moving average at about 85.23.
Adrian Schmidt, currency strategist at Lloyds TSB, said sterling’s rally against the dollar was coming to a close. -Reuters

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