Stg off lows vs euro, data helps gains
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