Sterling rises versus euro

Sterling gained against a broadly weaker euro on Friday, hitting a four-month high as concerns over Greece's debt situation weighed on the single currency. Gains in the pair also helped the pound edge up to a one-month high against the dollar, although it later eased off as investors cooled toward riskier assets.
The euro was down 0.6 percent on the day at 88.25 pence at 1438 GMT after falling to 88.11 pence, its lowest since mid-September last year. Losses accelerated after breaking a key level of 88.50/55 pence. Initial support was seen around 88.20 pence, a Fibonacci retracement level, technical analysts at Societe Generale said. Further downside support was seen near 87.85 pence, traders added.
Against the dollar, the pound was down 0.2 percent at $1.6295 after rising to $1.6357, its highest since mid-December last year. With little on the domestic agenda, the pound's moves were dictated by other major currencies. The dollar was helped as stocks fell after JPMorgan Chase's fourth quarter earnings showed deep losses on mortgage and credit card loans despite higher-than-expected profits.
Data showing a rise in US industrial output and tame consumer prices last month also supported the US currency. Meanwhile, European Central Bank President Jean-Claude Trichet said on Friday Greece had much work ahead to resolve its fiscal issues, after highlighting the fiscal challenges to a number of eurozone countries at a news conference the previous day.
The spread between Greek and German government bonds narrowed a bit on Friday but remained near 11-month peaks as markets remained sceptical about Greece's plans to cut its soaring budget deficit. "Fiscal woes may continue to limit, if not prevent, some upside movement in the euro in the weeks ahead," said Stuart Bennett, currency strategist at Calyon.
The euro was also pressured as data showed subdued eurozone inflation, which underscored Trichet's somewhat dovish comments after the ECB kept rates steady on Thursday, analysts said. December core euro zone consumer price index rose by 1.1 percent from the same period a year ago, below the ECB's target of near 2 percent. "The view is the ECB is only likely to hike interest rates after the US Federal Reserve and the Bank of England, and this is also undermining the euro," said Jane Foley, research director at FOREX.com.