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Pound Edges up, Still Stuck near Six-Week Lows Versus Euro

LONDON, April 15 (Reuters) - The pound edged up in early London trading on Thursday, helped by a broadly weaker dollar, but was still close to six-week lows versus the euro, struggling to regain momentum after it was hurt by profit-taking at the start of the month.

Sterling had a strong first quarter of the year, helped by relief that a no-deal Brexit was avoided at the end of 2020, the UK’s pace of vaccine rollout and a lessening of negative rates expectations. But it has had a weaker start to April.

“With the negative policy rate risk premium fully priced out, the hurdle for news driving further gains is much higher and news flow has become more ambiguous,” said Adam Cole, chief currency strategist at RBC Capital Markets.

Cole said that vaccine rates in the United States and Europe are rising sharply, narrowing the gap with the UK, meaning that sterling will not necessarily continue to benefit from the UK’s outperformance on the vaccine front.

The dollar sank to a four-week low, as Treasury yields pulled back from their recent highs - a move which nudged the pound higher.

At 0753 GMT, the pound was up 0.1% at $1.3792 against a weaker dollar.

Versus the euro, it was up 0.1% at 86.855 pence per euro. Sterling broke the key 0.85 level for the first time in a year at the start of April, but then weakened sharply in a move which analysts said was due to profit-taking.

But ING strategists were bullish, writing in a note to clients that the pound’s bout of weakness versus the euro is fading, and they were looking a “GBP recovery to EUR/GBP 0.85 this quarter.”

England reopened all retail, hairdressers, gyms and pub gardens on Monday and Scotland, Northern Ireland and Wales are due to reopen different sections of their societies in coming weeks.

But British Prime Minister Boris Johnson warned on Tuesday that the rapid drop in COVID-19 deaths was largely down to a three-month lockdown, not the vaccination programme, and that cases would rise once again as restrictions ease.

(Reporting by Elizabeth Howcroft; Editing by Simon Cameron-Moore)

Source: Reuters

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