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Markets

Greece hopes keep sterling near one-month low versus euro

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Strong gains for Catalan nationalists in regional Spanish elections hampered the euro, however, even though the result fell short of the convincing win needed to mount a push for a referendum on independence in the region.

 

Resurgent Catalan separatism could provoke a constitutional crisis in Spain just as the government is looking at a possible international bailout of its own.

 

The euro was steady at 80.90 pence, near a one-month high of 81.085 pence struck on Friday. But chart resistance at the 233-day moving average around 81.08 pence could hinder more gains.

 

"The euro will remain supported, just on relief at the prospect of a Greek deal," said Richard Driver, analyst at Caxton FX, adding he may have to review his previous forecast for the euro to be below 80 pence at the end of the year.

 

But he did not see the euro going beyond the October peak of 81.65 pence. "The Catalan election is a stumbling block and there is significant risk of profit-taking in the euro."

 

Euro zone finance ministers meet again on Monday to hammer out a deal to get international lenders to release aid to Greece in time for debt repayments due mid-December.

 

German Chancellor Angela Merkel said that she was confident a deal could be reached, while the French finance minister said on Sunday an agreement was close.

 

Against the dollar, the pound was down 0.1 percent at $1.6007, pulling away from Friday's three-week peak of $1.6051. Traders reported bids around $1.6000 which may cap any drop, though they also cited offers around $1.6050.

 

With little in the way of UK events or data, the pound was expected to be driven largely by developments outside the UK.

 

"Sterling is just bobbing around without any real independent direction. Traders are not playing, preferring other trades such as yen and the euro," FXPro analysts said in a note to clients.

 

But Tuesday's release of the second estimate of UK third quarter gross domestic product will be watched closely. It is expected to be unrevised from the previous estimate and any downward revision could weigh on the pound.

 

The first estimate showed the economy unexpectedly grew by 1.0 percent over the three months to September, sparking optimism that the country may be recovering better than previously thought.

 

A survey by the Confederation of British Industry on Monday showed confidence among Britain's service firms at its highest since May 2011, although the overall picture remained mixed.

 

 

Copyright Reuters, 2012