Sterling fell to its lowest in nearly two weeks against the euro on Tuesday, as softer-than-expected construction data highlighted the fragility of the UK economy while signs that Spain is ready to seek a bailout lifted the single currency. The euro extended its recovery from last week's three-week lows against the pound after European officials said Spain was ready to request a euro zone bailout for its public finances as early as next weekend.
Investors decided the news was encouraging enough to warrant fresh buying in the euro across most other currencies. The single currency was up 0.3 percent on the day at 80.10 pence, having earlier risen to a peak of 80.17 pence, its highest since September 20 and rising past reported stops at 80.10 pence.
"This is really a risk-on, euro strength story. The euro is stronger pretty much across the board," BMO Capital Markets' head of foreign exchange strategy, Audrey Childe-Freeman, said. "But on the other side of trade, we had some more disappointing data out of the UK this morning, with the latest housing figures coming in weak. It's a combination of both those factors that has led to a slightly disappointing performance in the pound so far this week," she said.
Sterling was up 0.1 percent against the dollar at $1.6136, off a two-and-a-half week low of $1.6109 hit on Monday, with traders saying a reported options expiry later at $1.6150 may influence trade and keep it close to that level. "Cable (sterling/dollar) is still vulnerable to the downside and could fall to $1.59 within the next week or two," said Michael Derks, chief strategist at FXPro. Traders reported offers at $1.6175, just above the 100-hour moving average at $1.6173, and analysts said the pound remained on a downward trend since hitting a 13-month peak of $1.6310 last month.
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