Sterling rose to a one-month high against the euro on Thursday and looked set to rise to its strongest in nine months as investors sold the single currency on disappointment that the ECB had not made more aggressive moves to curb the debt crisis.
The euro fell as low as 84.96 pence. Further falls would target the November 10 low of 84.86 pence, below which would be the euro's weakest since March. It later recovered to trade down 0.1 percent at 85.24 pence, with traders saying corporate demand for euros at around the 85.00 pence level had tempered the single currency's falls. The pound showed little reaction after the Bank of England opted to keep interest rates at 0.5 percent. The decision was expected, which left the market's focus on the euro and the European Central Bank.
Sterling was down 0.55 percent versus the dollar at $1.5625, tracking falls in the euro versus the US currency. This brought it well below an earlier high of $1.5770, its strongest in more than a week. The BoE also announced no change to its 275 billion pound asset purchase programme.
However, many in the market expect the central bank to announce additional quantitative easing next year as concerns grow about the fragility of the UK economy. The ECB cut rates by 25 basis points and offered banks long-term funds in a bid to soften a looming recession and avert a credit crunch, but it doused hopes of more dramatic action to tackle the region's debt crisis, which dented the euro.
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