Pound steady against dollar, euro

AFP - Friday, July 4 05:54 pm

LONDON (AFP) - The pound was steady after recovering earlier from a slump Thursday to three-week lows against the euro.

Attention will now turn to the upcoming interest rate decision in the UK, where recent weak UK data are likely to mean that the Bank of England is in no position to raise interest rates in order to counteract rising inflationary pressures.

The outlook for the UK economy darkened further this week after PMI indicators for the manufacturing, services, and construction sectors all showed activity has slumped, with unemployment on the rise and expectations for the future falling.

At the same time, however, the pricing components in these surveys hit new record highs, suggesting rate setters will have little room to cut interest rates any time soon.

Meanwhile, the euro stayed weak against the dollar as markets continued to digest Thursday's comments by European Central Bank president Jean-Claude Trichet, but with trade very quiet due to Friday's public holiday in the United States.

On Thursday the ECB raised interest rates by a quarter point to 4.25 percent. The decision had been fully expected, however, and the euro lost ground as Trichet failed to give any signal of further rate rises to come.

The news took the euro to an 8-day low against the dollar of $1.5653 earlier Thursday, though it has since recovered very modestly as trade winds down amid an absence of trade from the United States.

"The liquidity that was there into the North American open has dried up as the afternoon has progressed," said Matthew Foster-Smith at Thomson IFR Markets. Interest is "dwindling as European dealers cast an eye to the close", he added.

STERLING

London

14:32 GMT

12:27

U.S. dollar

1.9827

up from

1.9818

Euro

1.2636

up from

1.2642

Yen

211.41

unchanged

211.41

Swiss franc

2.0337

up from

2.0326

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