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Sterling gains as rates expected to stay on hold Reuters Sterling gained on Friday against a U.S. dollar weakened by credit market fears and sliding stock markets, shrugging off negative UK wage data as investors expect no interest rate cut from the Bank of England next week. The pound stayed close to 26-year highs versus the dollar set for the third consecutive day on Thursday, as expectations of a UK interest rate cut diminished despite lower than expected pay settlement data. "What's helping sterling is the complete lack of expectations for interest rate cuts," said David Simmonds, head of foreign exchange strategy at RBS Global Banking. The pound has been supported this week by comments from policymakers implying that an interest rate cut from the Bank of England is not imminent. BoE chief economist Charlie Bean said on Wednesday that policymakers cannot afford to lower their guard against inflation.
"This week the dominant focus for sterling has been on hawkish comments, not least from Charles Bean," Simmonds said. At 0913 GMT, sterling was trading at $2.0843, up 0.27 percent and just below the 26-year peak of $2.0869 set in the previous day's trading <GBP=>. Against the yen, the pound was up 1.21 percent at 239.22. The euro strengthened 0.13 percent to 69.42 pence <GBPJPY=R>. The market is awaiting U.S. payroll figures at 1230 GMT for indications on any further interest rate reductions after Wednesday's cut of a quarter of a percent. Sterling strengthened slightly against a yen which surged on Thursday on renewed fears of more subprime mortgage problems, hurting investors' risk appetite and prompting an unwind of carry trades.
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