RTRS:Sterling near 3.5 year high vs pressured euro
(Reuters) - Sterling hit a fresh 3-1/2 year high against a broadly weaker euro on Monday as investors concerned about the euro zone debt crisis and slowing global growth bought the pound as safer alternative to the single currency.
With no UK data scheduled, sterling's direction was expected to be dominated by moves in euro/dollar - which hit a two-year low on Monday - ahead of a meeting of euro zone financial leaders later in the session.
Many market players were concerned the meeting may do little more than highlight the limitations of measures to help indebted states and banks agreed at a summit last month. Rising Spanish and Italian bond yields added to the cautious market sentiment.
"Euro/sterling is going to remain offered while euro/dollar remains weak. The market is being particularly bleak at the moment," said Gavin Friend, currency analyst at National Australia Bank.
The euro hit a trough of 79.06 pence against the pound during Asian trade, its lowest level since November 2008, before paring losses to last trade steady at 79.31 pence.
Michael Hewson, senior market analyst at CMC Markets, said the next long-term target for the euro was 77.84 pence, the 61.8 percent Fibonacci retracement of the rally from 2007 lows at 65.35 pence to the 2008 highs at 98.05 pence.
The pound looked set to climb further against the euro despite the Bank of England opting to pump another 50 billion pounds into the UK economy to stimulate growth last week. Some analysts said policymakers may opt for even more stimulus later in the year.
"The Bank has timed it nicely (to do more) for the November inflation report. This should keep sterling on the back foot but the trump card is euro weakness at the moment and sterling will outperform," said National Australia Bank's Friend.
A rate cut by the European Central Bank last week also dampened the impact of looser Bank monetary policy, which is usually considered currency negative as it increases the supply of pounds in the system.
Sterling was close to flat against the dollar, holding above a four-week low of $1.5461 hit on Friday after weak U.S. non-farm payrolls data heightened concerns about lacklustre growth and boosted demand for the safe haven greenback.
Some analysts said the pound could rise against the dollar if market players increase bets that poor U.S. data will prompt the Federal Reserve to also announce another round of QE.
