Sterling firm, mortgage data awaited for BoE clues
Sterling ticked up versus the euro and dollar on Wednesday as investors looked ahead to mortgage data for clues on whether the Bank of England will cut interest rates next week or next month. Ahead of the 0830 GMT data, the pound reaped the benefits of a broad improvement in risk appetite, on speculation that the worst of the credit crisis may have passed after the latest batch of bank write-downs.
The main focus, though, remained on interest rate expectations, with bets of a near-term rate cut scaled back slightly after data on Tuesday showed manufacturers hiking prices at record rates, while input costs hit a 13-year peak. "(The data) may have disappointed some of the market doves ahead of next week's meeting," said Henrik Gullberg, currency strategist at Calyon.
"But the market is priced for a significant probability of a cut next week, so if we see a moderation in mortgage approvals and also in consumer credit, that probably will be sufficient to sustain those expectations despite the increase in the inflation component of the PMI yesterday."
By 0703 GMT, sterling was up 0.2 percent at $1.9800.
The euro fell half a percent to 78.65 pence <EURGBP=>, more than a penny below record peaks set on Monday.
Reflecting the improved risk appetite, the pound also added around half a percent versus the yen and the Swiss franc.
Mortgage approvals -- seen as a forward-looking gauge of the housing market -- are expected to match December's series low of 72,000 in February.
Mortgage lending is expected to hit a 2-year low of 7.3 billion pounds, while consumer credit is seen easing on the month, to 0.9 billion pounds.
Sourced by Reuters.