22 June 2001, 11:28  British Pound, Little Changed, Likely to Track Euro's Movements

By Chris Gothard, John Beresford-Peirse and James Amott
London, June 22 (Bloomberg) -- The British pound, which gained 1.3 percent against the dollar yesterday, was little changed amid expectations it will track the euro's fluctuations against the U.S. currency. Sterling was at $1.4161, compared with $1.4165 late yesterday, when it reached its highest since June 4. Against the euro, it was little changed at 60.32 pence, compared with 60.43. It has gained 2.6 percent against the single currency and it's little changed against the dollar in the quarter to date.
The pound and the euro are likely to move in tandem because of the trade relationship between Britain and the 12 nations sharing the euro and the possibility the U.K. will adopt the single currency in the next few years, analysts said. The U.K. sells about 60 percent of its exports to the euro region.
The U.K.'s export links ``mean sterling trades more in line with the euro than the dollar,'' said Steven Pearson, an economist at Halifax Plc. If the dollar strengthens against the euro, ``sterling will struggle against the dollar.'' The pound will drop to $1.40 in coming days, he said.
Recent expectations that the U.K.'s ruling Labour Party will attempt to take Britain into European Economic and Monetary Union earlier than expected after its June 7 landslide election victory have receded, analysts said. Chancellor of the Exchequer Gordon Brown indicated this week that a referendum on adopting the euro isn't imminent.
``Expectations of impending sterling entry to EMU have been dampened by the Chancellor,'' said Pearson at Halifax. That helped boost the pound yesterday, he said.
Sterling has fallen 5.2 percent against the dollar this year, compared with the euro's 9.4 percent plummet against the U.S. currency.
There were no major U.K. economic reports expected today.

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