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Friday, 23 November, 2001, 12:12 GMT
Sterling rebounds on Blair caution
The pound has rebounded off lows against the US dollar and the euro after Prime Minister Tony Blair's speech on euro membership turned out to be less bullish than expected.

Earlier, sterling had weakened on speculation that Mr Blair would, in a keynote speech, express much stronger support for euro membership.

A newspaper report that the referendum on membership would be held in 2005 also help push the pound down to a four week low against the euro, and four month low against the dollar.

But while saying that Britain's future was "inextricably linked" to Europe, Mr Blair's comments were not viewed as pro-euro as traders had expected.

At 1200 GMT, sterling had lifted to 62.11p per euro and $1.4148 from 62.58p and $1.4044 before the speech.

Analysts believe sterling needs to weaken further for exporters before Britain joins the single currency.

Sunset report

Europe Minister Peter Hain has dismissed as "fanciful" the newspaper report that the government would call a referendum in 2005 on joining the euro.

The report was published in the Sun, Britain's biggest selling daily newspaper, ahead of Mr Blair's speech.

The paper reported Mr Blair had "signalled privately" that he wants to hold the referendum on the same day as the next general election, which is due by 2006 at the latest.

Political influence

Sterling has experienced wild swings previously, as markets have attempted to interpret the significance of political developments on euro membership.

Sterling hit a 15-year low against the dollar in June, when Labour's sweeping general election victory was viewed as raising the chances of early UK adoption of the euro.

Sterling also weakened during the Conservative Party leadership run-off over the summer when pro-euro candidate Ken Clarke was briefly considered favourite to win.

Iain Duncan-Smith's victory saw the pound strengthen.

See also:

23 Nov 01 | UK Politics
Blair's new euro hint
21 Nov 01 | UK Politics
Government's 'limp' euro effort attacked
05 Nov 01 | Business
Brown puts brakes on euro ambitions
03 Oct 01 | UK Politics
Euro battle revived by Blair speech
30 Aug 01 | UK Politics
Hain hints about euro entry
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