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FX round-up: Profit takers hit euro

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Date: Friday 28 Mar 2008

LONDON (ShareCast) - Sterling made headway against the US dollar and the euro in London trading Thursday after a moderately encouraging report from the Confederation of British Industry (CBI) on retail sales.

The CBI’s reported sales balance rose to +1 in March from -3 in February. Expectations for March had been for a reading of –5.

The euro declined to 78.30p by mid-afternoon in London, though this was likely to have been more the result of profit taking following a strong run by the shared currency rather than any long term faith in the worth of sterling. Comments from Bank of England governor Mervyn King earlier in the week seemed to imply that the Bank was more disposed towards a base rate cut which would reduce sterling’s appeal.

Sterling moved a full cent above $2 in London after soft US GDP data for the fourth quarter. However, later on in New York sterling fell back to $2.0073, compared to $2.0093 at Wednesday’s close, as the dollar rallied against the UK currency, as well as the euro and the Japanese yen.

As in London, the euro's weakness was ascribed to profit-taking, while some suspected there may have been some covering of short-positions taking place too.

The dollar’s advance was restricted by downbeat comments from Atlanta Fed president Dennis Lockhart who backtracked on his earlier forecast of a turnaround in the economic outlook by mid-year, saying this was probably an over optimistic view.

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