LONDON: Sterling hit a more than two-week high against the euro on Tuesday, as uncertainty over whether Spain will seek a bailout and concerns about Greece's failure to hit the targets of its own international rescue hurt the single currency.
The pound was also lifted by talk of farm subsidy payments due later in the week, which the European Union makes to the UK once a year.
"Euro/sterling will remain in focus ahead of Friday's UK reimbursement flows for its agricultural sector, which could create a three billion pounds sterling-supportive flow coming out of euro," Morgan Stanley strategists said in a note.
With no UK data scheduled for release on Tuesday, investor focus was firmly on developments in the euro zone.
The European Central Bank's plan to ease the region's debt crisis by buying indebted countries' bonds has supported the euro in recent weeks, but the plan cannot be implemented until a country requests aid.
Signs that Spain is delaying asking for aid have unnerved investors and undermined demand for the single currency. The euro was broadly weaker and fell 0.3 percent on the day versus sterling to 79.40 pence, its lowest since Sept. 7.
"There's a realisation that what the ECB has done has been significant but it has not got rid of the crisis," said Jane Foley, senior currency strategist at Rabobank.
"There's a little bit of profit-taking in the euro which is natural given the extent of how far we have come this summer."
Recent reports on how much additional funds will be required to prop Greece up added to bearishness towards the euro. German tabloid Bild also unnerved investors with a report that the Bundesbank was getting lawyers to check the legality of the ECB's bond purchase plan.
Against the dollar, sterling rose 0.2 percent to $1.6257 . The pound remained within sight of a 13-month high of $1.6310 hit at the end of last week, supported by the US Federal Reserve announcing another round of monetary easing earlier this month.
Comments
Comments are closed for this article.