LONDON, Aug 20 - Sterling gained against a broadly weaker euro and was firm against the dollar on Wednesday as disappointing French growth data highlighted the euro zone's dim economic outlook. Data showed France's economy contracted by 0.3 percent in the second quarter, a weaker performance than expected. Recent figures have shown Germany and Italy also contracted in the second quarter, tipping these two countries into technical recessions. Sterling was up a third of a percent at 69.90 pence per euro in early European trade, testing the upper end of this month's trading band.
"The euro has reached very critical levels and we feel it may have further to fall against sterling," said Trevor Dinmore, foreign exchange strategist at Deutsche Bank. "Sterling's high-yielding status is attractive and Britain looks better placed to benefit from a global recovery." Sterling was firm against the dollar as dealers waited for minutes of the Bank of England's latest policy meeting and UK public sector borrowing data for July at 0830 GMT. The minutes are expected to show the Bank's policymakers voted unanimously to leave interest rates unchanged at 3.5 percent earlier this month.
The pound traded with a slightly firmer bias at $1.5910 , having recovered a cent from four-week lows set in the previous session as optimism the United States would lead a global recovery lifted the greenback to four-month highs against the euro and Swiss franc.//