Sterling edged up after hitting a 10-day low against the dollar on Monday, but it remained vulnerable along with other riskier currencies due to uncertainty about Greece's progress in completing a debt restructuring deal. Traders said some profit-taking on dollar gains helped lift the pound off its lows, though wariness before a deadline on Thursday for Greece to complete a bond exchange with private creditors could put sterling under more pressure in the coming days.
"The PMI was still OK, not as rosy as January but if we get a whole quarter with PMI around 54 then we can write off the risk of recession," said John Hydeskov, chief analyst at Danske Bank. Sterling was up 0.1 percent at $1.5857, recovering from a low of $1.5782, its weakest since February 24. Traders said market rumours of weaker PMI data meant most of sterling's falls came just ahead of the release.
The euro was steady against the pound at 83.37 pence, coming close to a 2-1/2-week low of 83.13 pence hit on Friday. It traded well below a high of 85.06 pence hit on February 24. The purchasing managers' survey on UK services sector activity, which is key to the economy, fell to 53.8 in February from a 10-month peak of 56.0 in January, below forecasts for a smaller dip to 54.9.
Any sterling gains were expected to be tempered by offers between $1.5890 and $1.5900, coinciding with the 200-day moving average, a closely watched technical indicator, around $1.5893, traders said. Renewed falls would see the pound target its 100-week moving average around $1.5778, then the 100-day average at $1.5710 and the mid-February low of $1.5644.
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