LONDON: Sterling fell to a four-month low against the euro on Monday after Spanish regional elections and comments from euro zone policymaker Joerg Asmussen boosted the single currency. But the pound firmed against the dollar as investors looked to preliminary GDP data due on Thursday which may support it. The euro rose to 81.52 pence, up 0.2 percent on the day, its highest since mid-June. Further gains could see it target the June 11 peak of 81.63 pence, above which would mark its strongest since early May. "The story is that sterling weakens against the euro. Slightly more risk sees cable (sterling/dollar) go higher but not as high as euro/dollar," said Paul Robson, currency strategist at RBS. The euro was supported above its 200-day moving average at 81.10 pence. But the pound rose 0.3 percent against the dollar to $1.6045, though it stayed below last week's peak of $1.6178. Market analysts at Alpari said in a note there was near-term resistance at Friday's high of $1.6066 and beyond that at $1.61. Comments from Asmussen that the European Central Bank (ECB) would do everything possible to show the euro is irreversible buoyed the euro and helped other currencies perceived to be risky, including the pound. Regional elections in Spain also saw Spanish Prime Minister Mariano Rajoy gain backing in his home region of Galicia, a boost for his austerity-focused government. KING'S SPEECH Market players turned their attention to preliminary UK GDP data due on Thursday. This is forecast to show the economy recovered to grow by 0.6 percent quarter-on-quarter in the third quarter after three consecutive quarters of contraction. If the figures show a solid UK recovery this would lift the pound. But strategists said sterling could be muted ahead of those numbers and take direction from developments in the euro zone, although investors will also have one eye on a speech by Bank of England Governor Mervyn King on Tuesday. Traders will be looking to see whether King gives any clues on the possibility of further monetary stimulus next month. "We think people have noted a more hawkish stance of the (BoE's) Monetary Policy Committee in recent minutes, so we could see Mervyn King at tomorrow's speech carry a more dovish element," RBS's Robson said. Better-than-expected public sector borrowing and jobs data last week dampened expectations that the Bank of England will embark on a further round of quantitative easing (QE), or money printing, in November. QE is generally seen as negative for a currency as it increases its supply. A strong GDP reading could add to bets the BoE will keep policy on hold, although Rabobank currency strategist Jane Foley said the pound may struggle to benefit given concerns government austerity measures could weigh on growth in the fourth quarter. "This week we could see a move back to $1.60 and over the month that is our view, finding support around the 50-day moving average (around $1.6009)."

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