LONDON: Sterling dipped against the euro on Wednesday as safe haven flows into the UK currency eased, and looked vulnerable against the dollar as investors awaited the outcome of Greek elections on the weekend.
With no UK data scheduled for release the pound looked set to be driven by developments in the euro zone. Rising Spanish bond yields and worries the Greek vote could increase the possibility of the country leaving the euro may weigh on the pound against the safe haven US currency.
The common currency edged up 0.2 percent against the pound to 80.45 pence, recovering from a two-week low of 80.11 hit on Tuesday as investors sought alternatives to the euro.
Euro/sterling has been hemmed in a range roughly between 81.50 and a 3-1/2 year low of 79.50 pence since the start of May, and many analysts said it was unlikely to break out before Sunday's vote.
The pound fell 0.1 percent against the dollar to $1.5552, with resistance at the June 6 high of $1.5601.
"It's very difficult to see people going extremely long risk or extremely short risk ahead of the weekend," said Raghav Subbarao, currency strategist at Barclays Capital.
"On the one hand sterling is a safe haven for euro area capital flows so likely to do relatively better than other European currencies. But as it is still a European currency and so likely to weaken against the dollar and yen."
Sterling has looked vulnerable to further falls, especially against the dollar, due to the growing risk the Bank of England will opt for more monetary easing later this year to protect the economy from the effects of the euro zone crisis.
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