(July 20 Reuters) Sterling rose against the euro and recovered all of the day's losses versus a broadly stronger dollar on Wednesday after a Bank of England survey showed no clear evidence of a slowing activity after last month's Brexit vote.
The survey reported signs that demand for credit was easing and that there were lower expectations for investment spending, but it also said the majority of companies did not expect any near term impact on capital spending from the vote.
That argued against the main narrative that has weakened sterling since the June 23 vote to leave the European Union: that the economy would tank in the second half of this year, forcing a sharp easing of monetary policy by the Bank of England.
"This data does look like a positive for sterling," said BNP Paribas strategist Michael Sneyd. "It plays into that suspicion that things may not be bad as we feared."
In the run-up to last month's vote, Britain's jobless rate fell to its lowest level since 2005, a separate report from the Office for National Statistics showed on Wednesday.
Sneyd also said BNP's own STEER positioning indicator shows best on further sterling weakness are extremely stretched, and that its analysis, even accounting for a large deterioration of Britain's balance of payments, shows fair value for the pound is around $1.35.
Sterling, which fell 1 percent on Tuesday, rose a full cent to $1.3186 after the BoE survey was published, gaining more than half a percent on the day. It rose 0.8 percent to 83.48 pence per euro.
Click on the link below to see the full story from Reuters: (by Patrick Graham and Yumna Mohamed)