Sterling was weighed down versus the dollar on Wednesday with risk sentiment precariously balanced and investors reluctant to buy the currency, which is set to remain under pressure owing to the fragile UK economy and a weak technical outlook. Sterling matched an 11-day low of $1.5698 hit the previous day as uncertainty over private creditor take-up for a Greek bond swap needed to avoid a disorderly default stifled risk taking and lent support to the safe-haven dollar.
An absence of UK data kept the pound open to swings in risk sentiment but flows were relatively light and it was last flat for the day at around $1.5720. Traders said it was supported by Asian sovereign demand but selling from a major US bank capped rallies.
"In cable $1.60 is looking like the peak of the recent recovery and the risks are now building for a deeper break to the downside," said Ian Stannard, head of European fx strategy at Morgan Stanley. Traders reported sterling demand placed around the $1.5700 area and stop-loss sell orders below. Key support was around the 55-day moving average at $1.5660, together with a cluster of recent lows around $1.5650.
The euro was close to flat against sterling at 83.41 pence, under pressure ahead of Thursday's deadline for Greece's debt swap. It remained well below its February highs near 85.00 pence, with traders reporting UK clearer selling of euros for sterling in the afternoon session. "GBP/USD has eroded its 2-month support line. Focus has shifted to more important support at 1.5650/43 - this will need to be fallen through for a top to be confirmed," said Commerzbank in a note.
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