Sterling rose to a one-month high against the euro on Wednesday, lifted by a better relative outlook for the UK economy, though it edged lower after data showing a rise in UK unemployment. The pound has been buoyed by a recent improvement in UK economic data, including on retail sales and house prices, which have lessened the risk of the country slipping into recession and of further monetary easing by the Bank of England.
"Some of the data out of the UK and the US recently indicates that credit channels may be starting to open up, at least relative to the eurozone," said Stephen Gallo, head of market analysis at Schneider Foreign Exchange. The euro fell to 82.85 pence, breaking below the early March low of 83.13 pence, where there was also support from a trendline drawn on the charts from the January low. Sterling was down 0.2 percent on the day against a firmer dollar, trading at $1.5670, after the Federal Reserve sounded a less downbeat note on the US economic outlook. The pound held above Monday's seven-week low of $1.5603, with traders again reporting firm demand around $1.5600/1.5595 and stop-loss sell orders below.
The euro trimmed losses and last traded down 0.2 percent on the day at 83.12 pence as data showed the UK unemployment rate held at a 13-year high in the three months to January while the number claiming jobless benefit last month rose more than forecast.
"The figures paint a generally weak picture, with unemployment rising further and pay growth weakening sharply," said Samuel Tombs, UK economist at Capital Economics. However, the common currency was well below a peak of 84.24 pence hit on Tuesday, a level which analysts said could now act as stiff resistance. A break below the February 16 low of 82.77 pence could pave the way for a drop towards the 2012 trough of 82.22.