Rebound in Risk Sentiment Pulls Sterling Higher

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LONDON, Jan 26 Reuters Sterling pulled away from a oneweek low against the dollar on Tuesday and also gained ground against the euro as rebounding risk appetite in broader asset markets weakened the U.S. currency.

The pound fell in early trade after risk sentiment ebbed overnight in U.S. and Asian markets.

However, sentiment turned around as European stock markets bounced and U.S. stocks hit record highs on strong corporate earnings, pushing the dollar back down and boosting riskier currencies.

Expectations of a large U.S. fiscal stimulus package has fuelled risk sentiment in markets in recent weeks, benefiting the pound, which has hit 212 year highs against a weakened dollar.

Sterling also hit its highest against the euro since May 2020 last week, with analysts attributing the pounds gains to a slower COVID19 vaccine rollout in the European Union than in Britain.

By 1452 GMT, sterling was up 0.3 against the dollar at 1.3720 and was also up 0.3 against the euro, at 88.60 pence. It earlier fell to 1.3610 against the dollar, its lowest in a week.

Its a function of the broader risk dynamic so I think sterling is still trading rather more on risk orientation than it is the domestic fundamental story, said Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets, adding that the market was not overtly concerned with data showing a rise in UK unemployment.

Data on Tuesday showed Britains unemployment rate hit its highest in nearly five years in the three months…

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