Sterling climbed to a nine-month high against the euro on Monday as the common currency came under heavy selling pressure, with investors concluding last week's EU summit made limited progress towards solving the eurozone debt crisis. The euro fell as low as 84.67 pence, its weakest since early March. European corporates were seen selling the single currency versus the pound, along with a UK clearer, traders said.
Trendline support from its May 26 low of 86.11 pence is at around 84.63, with traders citing bids below 84.60. There was some talk early in the session that UK Prime Minister David Cameron's decision to veto treaty changes put forward at Friday's summit would have a negative impact on sterling.
But analysts said that while this decision could see Britain gradually move away from the core of Europe and would have consequences in the longer term, in the near term the fact that the eurozone leaders had not made much progress would weigh on the common currency. Despite its gains against the euro, the pound fell against the dollar. It eased to $1.5537, its weakest in nearly two weeks, as investors sought safety in the dollar due to the eurozone crisis and the market preference to stay long dollars ahead of the year end. It last traded at $1.5608 but is likely to stay under pressure in coming weeks with soft UK domestic data likely to build the case for the Bank of England to resort to more quantitative easing.
Comments
Comments are closed for this article.