Sterling fell to its lowest in nearly three weeks against the dollar on Monday, dragged down by falls in the euro against the US currency as a downgrade of Greece's debt worsened eurozone debt worries. Traders and analysts expected sterling to stay under pressure on concerns the Bank of England may downgrade its growth forecasts later this week and add to expectations that UK interest rates will not rise in the coming months.
The pound dipped against the euro, although the single currency stayed well below last week's 13-month high of 90.43 pence. Sterling fell 0.6 percent to $1.6270 against a firmer dollar, its lowest since April 19. It broke below support at its 55-day moving average around $1.6277 and technical analysts said this could pave the way for a move towards the March low of $1.5937.
"Everyone is focusing on the euro zone at the moment, and sterling/dollar is just getting dragged down with the euro," a trader in London said. The euro was last up 0.2 percent against the pound at 87.61 pence, with key support at the 55-day moving average around 87.42 pence, which also coincides with the mid-April low. Some analysts said the euro's sell-off against the pound last week was overdone, as the BoE is still seen lagging the European Central Bank in raising interest rates.