The pound relinquished early gains against the single currency, closing marginally down at 1.0704 as rising risk appetite benefited the euro.
- Sterling initially rose against the single currency yesterday after data showed a smaller than expected rise in the number of UK jobless claiming benefits, and the overall unemployment rate unexpectedly held at 7.9%.
- This data prompted investors to further pare back some of the heavy bets built up against sterling in recent weeks, which have pushed the price to multi-month lows.
- In addition, some analysts have said that speculation over an extension of quantitative easing could be overdone, and that the pound / euro price could have correction potential.
- However, the market remained broadly bearish on sterling because of Britain’s deteriorating fiscal position and the likelihood that rates will remain at 0.5% for a long period.
- In afternoon trading, the euro clawed back its losses, supported by a significant rise in global equities, which buoyed demand for the broadly stronger single currency.
- The pound has reversed its down trend this morning, benefiting from the word so of a BoE policymaker who said that quantitative easing was now working.