Sterling gave back ground to a broadly firmer euro on Tuesday which recovered from the previous day's sell off, though the pound was likely to be supported in the medium term as markets focused on fiscal consolidation. Sterling had risen over one percent against the euro on Monday as the single currency was weighed by speculation Greece would need to restructure its debt soon.
The euro bounced back on Tuesday in thin trade as dealers adjusted positions ahead of the Easter break. "From the fiscal side, the UK looks far better placed, and I think we'll see growing concern about fiscal problems in the second half of this year," said Simon Derrick, head of currency research at Bank of New York Mellon. "In three to six months the euro should be heading towards 80 pence against sterling as markets focus on fiscal consolidation," he added.
The euro was up 0.3 percent for the day at 87.76 pence after falling to an 11-day low on Monday of 87.42. Sterling rose 0.2 percent against the dollar to $1.6294 after dropping to a two-week low on Monday of $1.6166. Traders reported Asian sovereign offers around $1.6300.
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