Sterling climbs back up as investors eye an opportunity and await data

Sterling rose on Wednesday, clawing back from recent losses and gained against the euro as investors covered short positions in the UK currency following its broad slide in past weeks. Still, sterling gains were capped and it remained in sight of a seven week low hit versus the dollar on Tuesday, as weak global shares kept a lid on demand for currencies considered to be higher risk, which include the pound. "There's still concern about the UK, especially its budget situation ... but the dollar outlook is also gloomy," said Robert Miniken, senior currency strategist at Standard Chartered in London. "It's inevitable that there would be potential squeezes for the dollar to go down, and sterling to rise." The GBP/USD is currently trading at $1.6310 as of 8:46am, London Time.

The European Central Bank will leave interest rates at a record low and signal it’s in no rush to withdraw emergency stimulus measures as the economy shows signs of recovering from its worst recession since World War II, economists said. ECB officials meeting in Frankfurt today will keep the benchmark rate at 1 percent, according to all 58 economists in a Bloomberg News survey. The central bank, led by President Jean Claude Trichet , won’t raise rates before the third quarter of 2010, another survey shows. “The ECB will acknowledge that the recovery is going well and that we’ll see an early return to growth,” said James Nixon, chief European economist at Societe Generale SA in London. “But they won’t be swinging from the rafters.” The EUR/USD is currently trading at $1.4295 as of 8:57am, London Time.

The JPY retained broad gains on Thursday, supported near seven-week highs on the U.S. dollar on renewed concerns that the recovery in the world's largest economy would be gradual at best. Latest data showed a rise in U.S. factory orders while the private sector shed fewer jobs in August than in July, but that failed to support stocks. The U.S. government will release the nonfarm payrolls report for August, which includes public and private sector jobs. Economists polled by Reuters expect job losses of 225,000 for August. All eyes on Thursday will be on the European Central Bank which is widely expected to keep interest rates at 1.0 percent. But ECB President Jean-Claude Trichet may caution against growing talk of a speedier recovery in the euro zone. The USD/JPY is currently trading at 92.35 as of 9:15am, London Time.

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