Sterling rises against the dollar and may target $1.60 as investors take risk

Sterling jumped against the dollar on Wednesday, helped as ongoing optimism that the global economy is on the road to recovery weighed on the U.S. currency and stoked demand for riskier assets. Gains in U.S. equities and oil prices encouraged investors to take on more risk, while a move in sterling beyond its 200-day moving average against the dollar a key technical level helped it extend gains. The UK currency has risen by nearly 6 percent against the dollar so far this month, leaving it on course for its biggest monthly gain since 1993. The UK currency has risen by nearly 6 percent against the dollar so far this month, leaving it on course for its biggest monthly gain since 1993. The IMF said any recovery in the UK economy is likely to be subdued and warned that it is susceptible to potential shocks given high levels of borrowing and the fragility of the financial sector. The GBP/USD is currently trading at $1.5770 as of 8:43am, London Time.

Euro zone and U.S. business surveys are expected to confirm on Thursday that the world's worst recession in six decades is easing, but that it will take some time before the global economy will start growing again. The latest reminder that the path to a recovery will be long and rough came from the U.S. Federal Reserve, which cut its economic forecasts for the next three years while noting some modest improvements in the U.S. economy last month. The bleaker outlook knocked stocks off from six-month highs scaled on Wednesday, even as Treasury Secretary Timothy Geithner offered fresh assurances that the U.S. financial system was healing. The EUR/USD is currently trading at $1.3777 as of 9:00am, London Time.

Japan's Nikkei stock average lost 1.2 percent on Thursday, with Honda Motor Co and other exporters down as the yen climbed to a 2-month high on the dollar and after the Federal Reserve cut its outlook for the U.S. economy. Tech shares fell in the wake of losses by their U.S. peers, with Sony Corp dropping 1.6 percent, despite saying it plans to halve the number of its parts and materials suppliers. Market analysts said the Federal Reserve's gloomy views on the economy, which included cutting its 2009 gross domestic product forecast and raising its outlook for unemployment, were contributing to an overall uncertain mood. The USD/JPY is currently trading at 94.77 as of 9:06am, London Time.

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