UPDATE 1-Sterling drifts lower vs dollar, rises vs euro; BoE speeches in focus

LONDON, Sept 2- Sterling fell against a rebounding U.S. dollar on Wednesday but rose against the falling euro as traders looked to speeches from several Bank of England officials for direction. Investors will be poring over speeches from five out of the nine Bank of England’s monetary policy committee members- including its governor Andrew Bailey- for any fresh…

* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv(Adds new chart and comment and updates prices)

By Olga Cotaga

LONDON, Sept 2 (Reuters) – Sterling fell against arebounding U.S. dollar on Wednesday but rose against the fallingeuro as traders looked to speeches from several Bank of Englandofficials for direction.

Investors will be poring over speeches from five out of thenine Bank of England’s monetary policy committee members -including its governor Andrew Bailey – for any fresh insightinto its stance on negative interest rates.

The BoE said last month negative rates are part of theirmonetary tool box but that it saw no immediate case to cutinterests rates below zero.

Britain’s central bank has taken rates to record lows andramped up bond purchases this year to support an economy hit bythe coronavirus and the exit from the European Union.

The speeches “are likely to keep the debate on negativepolicy rates alive in the UK”, said Adam Cole, chief currencyanalyst at RBC.

Sterling fell 0.2% against the dollar to $1.3364,having risen to an eight-month high above $1.34 the day prior.The pound was up 0.3% against the euro at 88.74 pence, athree-month high.

“I wonder if yesterday’s GBP/USD move finally flushed outthe last GBP shorts,” said Kit Juckes, macro strategist atSociete Generale.

Latest CFTC data showed that the leveraged funds held a verysmall amount of sterling short positions in the week ending Aug.25. Fresh data which will include Monday and Tuesday this weekwill be released next Monday.

Trade-weighted sterling meanwhile remainedrange-bound, and well below its pre-Brexit referendum level. Thefact that the real effective exchange rate in sterling is muchlower than that in sterling/dollar indicates the recent sterlingstrength came solely on external factors.

“Sterling remains very weak in real effective terms whichmeans it can only go down with the help of big short positions,”Juckes said.

Recent data painted a mixed picture of the economy.

British house prices hit an all-time high in August,mortgage lender Nationwide said on Wednesday, adding to signs ofa sharp rebound in the housing market after the coronaviruslockdown.

The minister of finance, Rishi Sunak, cut a tax for housepurchases in July as he sought to spark the broader economywhich shrank by a record 20.4% in the April-Juneperiod.

But industry data on Wednesday showed retailers discountedtheir goods a bit more aggressively in August than in July asthey sought to lure customers back after the coronaviruslockdown earlier in the year.

(Reporting by Olga Cotaga; Editing by Ana Nicolaci da Costa andChizu Nomiyama)

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