Sterling Holds Gains

Sterling rose to within a whisker of last week's seven-month high versus the dollar on Monday after stronger than expected British retail sales and upbeat mortgage lending numbers dampened talk of a rate cut.

The dollar weakened against most major currencies after the Group of Seven industrialised nations on Friday stepped up rhetoric to say that China must let its currency rise to help cut its growing trade surpluses with the rest of the world.

But sterling extended its gains versus the greenback and also rose versus the euro on news that retail sales rose by a monthly 0.7 percent in March, more than double forecasts.

Separately, data also showed that underlying mortgage lending growth jumped in March to its highest level in nearly two years, according to the British Bankers' Association.

"They (data) came in a bit stronger than expected -- that would take away some of the arguments for a cut in UK interest rates," said Geraldine Concagh, economist at AIB Group Treasury.

After the data, sterling rose as high as $1.7931 , just short of last week's seven-month high of $1.7935. But it found resistance at those levels and pared gains. By 1026 GMT it was changing hands at $1.7909, up half a percent on the day.

The euro was down 0.17 percent versus sterling at 69.14 pence, off a post-data session low of 69.04 pence.

Some economists expect that slowing growth will prompt the Bank of England to cut interest rates from the current 4.50 percent in coming months. However upbeat economic data supports those who argue that rates will stay on hold.

But Gavin Friend at Commerzbank said sterling was likely to remain under pressure versus the euro as the European Central Bank is expected to tighten its monetary policy steadily.

"There is no reason why sterling shouldn't continue to lose ground steadily versus the euro because although the market is looking less for UK rate cuts, the point is that the rate differential between the UK and the euro zone is going to continue to narrow this year," he said.

Interbank rates
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