Stg off lows vs euro, data helps gains

The Financial Daily - - MONEY & FOREX -

LON­DON: Ster­ling bounced from a five-month low ver­sus the euro on Wed­nes­day, helped by wor­ries over the euro-zone's debt cri­sis, al­though ex­pec­ta­tions UK rates will rise later than those in Europe checked gains.

The pound also made gains against the dol­lar, ad­vanc­ing to a session high of $1.6083 af­ter data showed Bri­tish ser­vice sec­tor ac­tiv­ity re­bounded in Jan­uary to grow at its fastest monthly pace since July 2002.

Traders said stops above $1.6060 were tripped as model funds bought ster­ling with of­fers said to be above $1.6100 and $1.6115. The $1.6115 level is the 38.2 per cent re­trace­ment of ster­ling's fall from its 14-month high of $1.6403 on March 22 to $1.5937 low struck on March 28.

"We are look­ing for the $1.6090/6140 area to pro­vide strong re­sis­tance and the risks are for the mar­ket to pull back to $1.5750/80 be­fore bas­ing signs emerge," said Phil Roberts tech­ni­cal an­a­lyst at Bar­clays Cap­i­tal.

Against the euro, ster­ling held on to its ear­lier gains.

The euro was down 0.4 per cent for the day, at 87.77 pence, re­treat­ing from a five-month high of 88.365 pence struck on Tues­day. De­spite Wed­nes­day's drop, the com­mon cur­rency is up 2.3 per cent on the year, helped by ex­pec­ta­tions that the Euro­pean Cen­tral Bank will raise rates much be­fore the Bank of Eng­land.

Traders said funds as well as Euro­pean and UK clear­ing houses sold the euro, push­ing the cross to a low of 87.53 pence. Near term sup­port for the pair is seen at its 10-day mov­ing av­er­age which comes in at 87.45 pence. The pound also rose against the yen to its high­est in more than two weeks, at 133.65 yen. The Ja­panese cur­rency has come un­der broad pres­sure, hit­ting 10-month lows against the euro and touch­ing its low­est level in nearly three weeks ver­sus the dol­lar as in­ter­est rate dif­fer­en­tials widened in favour of US and Euro­pean cur­ren­cies. -Reuters

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