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Sterling Steadies after Strongest Q1 Versus Euro Since 2015

LONDON, April 1 (Reuters) - The pound was little changed against the dollar on Thursday and a touch lower versus the euro, but traders remained optimistic about its longer-term prospects, boosted by expectations for a vaccine-led economic recovery in the UK.

Sterling had its strongest quarter against the euro since 2015 in the first three months of the year, gaining around 4.8%. Analysts said the rise was largely due to the UK’s rapid vaccine rollout - one of the fastest in the world - as well as relief at the start of the year that a no-deal Brexit had been avoided.

Public opinion in Britain about the government’s handling of the pandemic has turned positive and companies are also more optimistic, according to three surveys published on Thursday.

The British Chambers of Commerce said 55% of member firms expected higher turnover in 12 months ahead - the highest in a year - although immediate business conditions were well below pre-pandemic levels as the country began 2021 under lockdown.

On Wednesday, revised GDP data showed that Britain’s coronavirus-hammered economy grew more quickly than previously thought in the final three months of 2020 - although it still shrank by the most in more than three centuries for the year as a whole.

This revision should support the pound on a relative basis, ING strategists said in a note to clients, with euro-sterling “remaining pressured” near 0.8500.

At 0801 GMT, the pound was flat against the dollar at $1.3787.

Versus the euro, it was down around 0.1% at 85.155 pence per euro.

“While the GBP may continue to struggle vs. the USD in the current environment, we expect that it will remain well supported vs. low yielding G10 currencies such as the CHF, JPY and the EUR,” wrote Rabobank senior FX strategist Jane Foley in a note to clients.

Rabobank lowered its forecast for the euro versus the pound for the next three months, to 0.85 from 0.86.

But Foley added that there are “choppy conditions” ahead for the pound, as the UK economy still has far to go before returning to pre-COVID levels.

UBS said in a note that it favours sterling versus the dollar, and had raised its forecast for sterling-dollar to $1.49 by the end of the year, from $1.46.

Final UK manufacturing PMI data for March is due at 0830 GMT.

Lockdown restrictions are gradually being lifted in England, with more substantial changes, including the re-opening of non-essential retail and outdoor hospitality settings, due on April 12.

(Reporting by Elizabeth Howcroft; Editing by Hugh Lawson)

Source: Reuters

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