Sterling eased from a six-week high against the dollar on Tuesday, as currencies perceived to be riskier came under pressure amid growing uncertainty whether policymakers will take major steps to tackle the eurozone debt crisis. Sterling was marginally higher against the euro, with investors increasingly wary about positions in the single currency as optimism that an EU summit will provide a comprehensive solution waned.
The euro fell to a session low against the dollar with growth-linked currencies coming under more selling pressure after data showed US consumer confidence tumbling in October. "Everyone was getting a bit carried away, thinking there will be more progress than there actually will be at the EU summit," said a London based spot trader. "I think there is too much event risk and I reckon smart money is starting to buy dollar on dips."
Sterling was slightly lower on the day at $1.5970, retreating from a six-week high of $1.6040 struck earlier in the session. Traders reported decent offers with resistance highlighted at $1.6043, the 100-day moving average. While Middle East and UK investors bought sterling at lower levels, traders said risk sentiment was fragile heading into the summit. On the downside, support was at $1.5940 - the 50 percent retracement of the pound's fall from a high of $1.6618 to a 14-month low of $1.5270 on October 6. The euro was at 87.10 pence, confined within its recent range.