Currency Improvement for Sterling

Sterling climbs vs broadly weak dollar

* Sterling climbs vs dollar, dollar struggles after payrolls * Pound unchanged vs euro, sterling seen staying weak * Markets await UK retail sales, output data due this week

LONDON, Jan 11 (Reuters) - Sterling rose on Monday, boosted against the dollar after a weak reading of U.S. employment kept the U.S. currency under broad selling pressure.

The pound was supported versus the dollar, but gains were capped and sterling was unable to push higher against the euro as investors remain wary of the UK's mounting debt burden and weak economy, along with concerns about political uncertainty.

"Sterling is unlikely to outperform. If we get any bad news, euro/sterling will weaken," said Paul Robson, currency strategist at RBS in London.

By 1440 GMT, sterling GBP=D4 had climbed 0.6 percent to $1.6130, near the day's high of $1.6194.

The dollar remained under selling pressure in the wake of weak U.S. payrolls figures released last week and after a Federal Reserve official on Monday said U.S. interest rates may remain low for some time.

Still, sterling's gains were capped, with traders citing sell orders from Middle Eastern names as the pair approached the $1.62 level.

The pound poked above its 200-day moving average against the dollar around $1.6117 on Monday. Some in the market said that level would likely keep a ceiling on near-term gains.

Others said they expected sterling in the near term to push above the mid-$1.6250 level, which would be its strongest in roughly a month, but in the absence of any big driver, significant gains beyond that would likely be limited.

"Early this week we suspect cable will trigger stops above $1.6250 and revisit the $1.63/1.64 area," technical analysts at Barclays said in a note.

"Beyond that more sideways chop is the likely theme."

The euro EURGBP=D4 was flat on the day at 89.92 pence.

Analysts said UK economic and political issues would keep sterling under selling pressure against the euro, while any pound gains would be limited by the pair's 200-day moving average around 88.50 pence.

Sterling in past months has been dogged by the view the UK economy will remain weak for much of 2010, and that the Bank of England may be among the last of the major central banks to raise interest rates.

This is seen dampening the pound's appeal from a yield perspective. In addition, concerns about the UK political situation are seen keeping sterling weak as the nation prepares for a general election to be held by mid-year.

The possibility that no party may win an overall majority would leave the government struggling to pass measures needed to reduce the nation's ballooning budget deficit.

Underlining ongoing weakness in sterling, data from the Commodity Futures Trading Commission last week showed an increase in short sterling positions, indicating that speculators are continuing to bet that the pound will fall.

With few economic data or news driving sterling on Monday, markets awaited a reading of UK retail sales on Tuesday and industrial output figures later in the week for more clues of whether the economy is making a sustained recovery. (Editing by Andy Bruce)
 

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