Sterling hovered close to 2011 lows versus the euro on Friday and was poised for further losses on concerns over UK economic growth and uncertainty over the timing of a Bank of England rate hike. The single European currency narrowly extended its 1 percent rise on Thursday when weaker-than-expected UK consumer spending data raised concerns over growth.
"The pound is under pressure. Weak retail figures, a somewhat dovish tone from the MPC minutes on Wednesday as well as George Osborne cutting the UK growth outlook and rate hike expectations being pushed back, are putting sterling on the backfoot," said Geraldine Concagh, economist at AIB Treasury Group.
"Trichet and others have made it clear that they will hike rates as intended despite news events around the world. The discrepancy between the BoE and ECB is pulling euro/sterling higher. There is a good possibility that the pair can go as high as 90 pence," said Beat Siegenthaler, currency strategist at UBS. The single currency rose to 88.12 pence, its highest since November 4. It later eased to 87.85, close to unchanged on the day.
Technical analysts said the outlook for the euro remained positive after a break above key trendline resistance at 87.60, drawn from the all-time highs around 98.05. Sterling extended its retreat from a 14-month high against a broadly firmer US dollar, trading down around 0.4 percent at $1.6052.
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