Thursday, 29 November 2012 15:44
LONDON: Sterling fell against the euro on Thursday on weaker UK lending data with expectations of further monetary policy easing likely to keep the British currency under pressure.
Market players cited some buying of the euro and selling of sterling by central banks for month-end requirements. Traders said sentiment towards the pound was also soured by speculation that rating agencies could cut Britain's triple-A credit rating early next year.
The euro gained 0.2 percent to 81.03 pence, edging towards a one-month high of 81.145 pence hit on Monday. Sterling was flat against the dollar at $1.6009 with option expiries at $1.6000 cited by traders and offers above $1.6030.
Bank lending to the real economy fell at its sharpest pace in more than two years while broad money supply grew slightly in Britain in October.
"The lending data are still very weak, meaning further policy measures from the Bank of England are still very much on the table," said Jane Foley, senior currency analyst at Rabobank.
Foley added the increased chance of easing in the UK was likely to cap any rallies in sterling against the dollar while swings in market sentiment over the US budget deadlock would also dictate its moves in the near term.
The euro's gains against the pound could be limited, however, as investors expect weaker data from the euro zone.
"For now, the spotlight shifts to the slew of euro zone economic data due today," BNP Paribas said in a note.
"We are bearish euro/sterling given our expectations for softer economic data, while the growth picture in the UK is expected to outperform the euro zone."
Copyright Reuters, 2012