Sterling fell more than half a percent to a seven-week low against the dollar on Thursday, still reeling from news earlier this week of a record British trade deficit. The pound also lost ground to the euro, hitting a one-month low for a second consecutive session, before recovering to stand little changed on the day. "Sterling is still suffering a hangover from this week's trade deficit data," said Paul Robson, international economist at Bank One in London.
"With the market in profit-taking mode, currencies that have risen the furthest now have the furthest to fall." Sterling stood at $1.7945 in early European trade, having lost more than five cents against the dollar since data on Tuesday showed Britain's trade gap widened to a record 5.6 billion pounds in January. Against the euro, the pound was steady on the day at 67.80 pence . The pound's strength at the start of the year was widely blamed for the unexpectedly sharp deterioration in Britain's January trade balance. Sterling staged a broad-based rally at the start of the year as traders bet interest rates in Britain would rise more quickly than in the United States or euro zone, bolstering the attractiveness of sterling deposits. The pound is still up more than three percent against the euro since the start of the year, but its gains against the dollar have been pared to just half a percent.////