Sterling hits $1.50 but falls back slightly on fluttering equities

Sterling pared most gains against the dollar after briefly hitting a two-month high on Wednesday, as a rise in UK share prices petered out. With little fresh news, currency markets have been looking at equities for market direction. London's FTSE index was flat by late morning trade after briefly turning higher. Data on the UK housing market proved mixed, with the pound initially getting a boost after figures showed the pace of decline in UK house prices slowed. "There is little doubt that the housing market remains weak, and with unemployment rising rapidly it is difficult to muster any strong enthusiasm for forecasting a robust up-turn this year," said analysts at Barclays Capital. The GBP/USD is currently trading at $1.4960 as of 8:30am, London Time.

The yen rose against the euro, after a government report showing China’s economy expanded at the slowest pace in almost a decade lowered demand for higher-yielding assets. The yen gained against the dollar before U.S. reports today that may show home construction slowed and initial claims for jobless benefits increased. The euro weakened on concern a European Union report today will show industrial production dropped the most on record. “It looks like people who had sold the yen on hopes for better China figures had to buy back the yen to cover their short positions,” said Akifumi Uchida, at Sumitomo Trust & Banking Co. “Worries over the global slump will probably persist in the short term.” A short position is a bet an asset will decline. The EUR/JPY is currently trading at 129.85 as of 9:00am, London Time.

The Australian and New Zealand dollars weakened after China said its economy expanded at the slowest pace in almost 10 years, raising concern the global recession will deepen. Australia’s dollar reversed earlier gains versus the U.S. currency and the yen after the Chinese government report showed economic growth slowed to 6.1 percent last quarter from 6.8 percent in the prior three months. “The renewed weakness was very much linked to the China GDP data after pre-release rumors that growth could have been as much as 8 percent,” said Greg Gibbs, director of foreign- exchange strategy in Sydney at Royal Bank of Scotland Group Plc. “A lot of the good news for the Australian dollar has already been priced in.” The AUD/USD is currently trading at 0.7200 as of 9:08am, London Time.

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