Sterling turned positive against the dollar on Monday, tracking a bounce in the euro/dollar exchange rate after comments from a top eurozone policymaker calmed immediate fears about stability in the region. Eurogroup chairman Jean-Claude Juncker said the European Stability Mechanism will not have preferred creditor status, removing a potential reluctanceamong investors to lend to countries such as Ireland and Portugal which could make it easier for them to re-enter the markets.
Cable tracked gains in euro/dollar to reach $1.6200, up almost 0.1 percent on the session, as investors recovered from concerns that eurozone finance ministers had decided to hold off agreeing on the next tranche of emergency loans to Greece. Juncker's comments, made in Luxembourg where finance ministers are meeting to discuss the bailout funds, also helped euro pare losses against the pound to reach 88.27 pence, after earlier slipping to 87.90 pence.
Analysts said concerns about the health of the UK economy could add to euro/sterling momentum, despite a vote of confidence for the newly reshuffled Greek cabinet on Tuesday. The pound has struggled in recent weeks under a slew of lacklustre economic data pointing to slowing growth.