Sterling gained against the euro on Thursday as the common currency was hit by concerns of delays to a second Greek bailout and the pound was supported by fresh questions over whether there would be further UK monetary stimulus. Sterling also rose against the dollar, helped by a large buy order at the 1600 GMT Bank of England fix, when the bank sets a reference rate, traders said.
It climbed above a near three-week low hit earlier in the week when ratings agency Moody's put the UK's prized triple-A credit rating on negative watch. The euro was last down 0.5 percent on the day at 82.84 pence. Traders reported support at this month's low of 82.64 and cited stop-losses below, with a break potentially exposing the year's low of 82.22 pence.
Sterling climbed 0.3 percent against the dollar to $1.5746. Bids were highlighted at $1.5660 and $1.5640. Sterling/dollar implied volatility, a measure of market expectations of future price swings, moved further away from multi-year lows. One-month vol traded around 8.25 percent versus 7.60 percent on Wednesday.
News that Greece and its international lenders have agreed on budget cuts worth 325 million euros helped improve fragile risk sentiment that took a knock after a decision on the Greek bailout was delayed. A three-hour teleconference between euro zone finance ministers late on Wednesday failed to resolve all the issues surrounding a second aid package for Athens, putting off any decision on the matter until February 20 at the earliest.
The pound garnered some support from the Bank of England's quarterly inflation report released the previous day when an upward revision to the BoE's two-year inflation forecast reduced expectations for more monetary stimulus.
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