* Sterling up 0.2 percent against dollar, euro
* Pound on track to post gains against dollar in 2013
* BoE worried strong pound threatens recovery
By Shadi Bushra
LONDON, Dec 23 Sterling firmed against the
dollar and the euro on Monday, as investors remained buoyant
about the prospects of the British economy going into the new
The pound was up around 0.2 percent against both
the dollar and the euro, trading at $1.6370 and 83.60 pence per
The pound is on track to post gains against the dollar this
year, with gains picking up in the last six months as the UK
economy improved faster than many of its European peers.
Last week saw a string of positive economic indicators that
highlighted Britain's slowly strengthening recovery.
"That will have a small bearing, but I don't think there's
an ongoing move on the back of strong data from last week," said
Richard Wiltshire, chief FX broker at ETX Capital. "We saw the
moves and now most markets are quite happy within their ranges.
People are quite happy to coast to the year end."
Apart from thin trading conditions sidelining many,
investors are likely to be wary of the pound in the near term
after Bank of England policymakers warned that a substantial
further appreciation of sterling would pose "additional risks to
the balance of demand growth and the recovery."
BoE policymakers could step up their rhetoric against the
further sterling gains, analysts said. One way they can curb
sterling's gains is to reiterate their pledge to keep rates low
for longer. That is likely to put downward pressure on rising
short term market rates.
"We remain cautious on sterling/dollar as the BoE is
unlikely to start raising interest rates before the Fed," said
Mansoor Mohiuddin, head of FX strategy at UBS.
"Both central banks may only begin hiking in the second half
of 2015. But sterling should make renewed gains against the euro
towards 0.81 pence as the European Central Bank keeps its
explicit easing bias in 2014."