Sterling hit a six-week low against the dollar on Wednesday, tracking steep falls in riskier currencies and assets, but rose versus the euro as poor demand at a German debt sale and weak eurozone data fed fears about the currency bloc. German Bund futures, the euro and European stocks fell after a poor auction of 10-year government bonds raised concerns German sovereign debt may be losing its safe haven appeal.
Sterling hit a six-week low of $1.5498, tracking falls in the euro against a dollar supported by safe haven demand. The pound was also pressured by worries about how much damage the euro crisis is inflicting on a fragile UK economy. "Downward pressure remains on sterling against the dollar as there are growing signs of the risk of recession in the UK as well as in Europe," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi.
The pound's losses were held around $1.55, a level, which proved stiff resistance on several occasions in early October. "Sterling lacks the momentum to make headway on its own and is at the whim of movements in the euro against the dollar," said Alex Lawson, senior dealer at Moneycorp. Many market participants see room for the UK currency to gain against the euro, however. The euro fell 0.5 percent to 85.98 pence, pulling away from a three-week high of 86.65 pence hit on Tuesday. More falls would bring into target its 200-week moving average around 85.59 pence.
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