Sterling pulled away from a one-month low against the euro on Thursday as investors booked profits in the common currency after the European Central Bank signalled it will raise rates in July, as was widely expected. ECB President Jean-Claude Trichet shied away from signalling hikes beyond then, a factor which drove money markets to push back rate hike expectations in coming months and led to a broad sell-off in the euro.
But with the UK mired in a slowdown, traders said the euro was likely to find support at 88.25 pence-the 50 percent retracement of the euro's fall from a high of 90.43 pence on May 5 to a low of 86.11 pence on May 26. Stops are cited below 88.40 pence.
The euro was last down 0.3 percent at 88.60 pence, retreating from a one-month high of 89.76 pence on Wednesday. It drew some support from a Reuters report which said a new bailout for Greece was likely to total 120 billion euros and the EU was seeking ways for the private sector to participate in the bailout, perhaps though a bond swap. Against the dollar, sterling was down 0.14 percent at $1.6372, with strong bids at $1.6350 and further below in the $1.6300/20 area. Support is seen near the 55-day moving average which comes in at $1.6333 on Thursday.
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