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Sterling: the Currency That's Most Like Rocky?

Dhara Ranasinghe

It gets knocked down and then it gets back up again: recent trade in sterling is much like the performance of underdog boxer Rocky in the popular U.S. film series, but the behavior is also a sign that sentiment towards the weak currency is changing, says one strategist.

Sterling (Exchange:GBP=), this year's second worst performing major currency after the Japanese yen (Exchange:JPY=), is up about 2.7 percent from a two-and-a-half year low of around $1.4829 hit last month.

(Read More: What Will Push Dollar-Yen Past 100 )

Although economic data out of the U.K. remains weak, the bad news now appears to be priced into the British pound and from a technical point of view, the currency's fall against the dollar appears to have bottomed, said Ed Ponsi, managing director at Barchetta Capital Management in New York.

"At this point (sterling/dollar) cable is looking like a British Rocky Balboa. The market keeps giving it a shot but it's got the iron jaw and keeps coming back for more," Ponsi told CNBC's "Asia Squawk Box."

"I like that, I think that's trying to tell us something because when sentiment changes later on we figure out why that happened, but I think we are seeing sentiment change right now with the British pound," he added.

The fact that sterling has seen a series of higher lows and higher highs against the dollar was a positive sign, Ponsi added.

(Read More: Sterling May Get 'Smoked,' HSBC Warns )

Sterling has fallen more than 6 percent against the dollar and 5 percent against the euro this year amid a slew of weak economic data and concerns about the outlook for growth.

The past week in particular has been hard for the U.K., with the International Monetary Fund criticizing the country for its austerity plans and Fitch Ratings on Friday becoming the second ratings agency to strip the U.K. of its triple-A rating.

An advanced reading of gross domestic product growth due Thursday is expected to show the U.K. economy showed little growth in the first quarter.

With latest economic data out of the euro zone also weak and talk of an interest rate cut from the European Central Bank growing, there was room for sterling to recover some more ground, especially against the euro, Ponsi said.

(Read More: UK 'Not Much Room for Maneuver:' Fitch )

Data released on Tuesday suggested Germany, Europe's largest economy is losing steam - the German Purchasing Manager's Index, a gauge of manufacturing activity, fell to 48.8 in April from 50.6 on March and marked the first decline in five months.

(Read More: ECB Should Not Cut Rates: Top German Adviser )

"We could see a rate cut coming very soon from the ECB - I really didn't like the German manufacturing PMI, that's very bad to come out under 48," Ponsi said. "I think Europe is in a worse position and the euro will go lower and lower especially against the pound."

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