Sterling hit a six-week high against a broadly weaker euro and a basket of currencies on Wednesday, but it fell against the dollar after a weaker-than-expected survey on UK services sector activity. A survey by Markit and the Chartered Institute of Purchasing and Supply showed the purchasing managers' index on the UK's dominant services sector fell to 56.5 from 58.4, well below forecasts for 58.0.
The data highlighted weaknesses in the UK economy, which weighed on sterling, although this was reflected mainly in falls against the dollar as concerns about Greece's parlous fiscal health sent the euro lower against a range of currencies.
"The fact that the services PMI number is turning lower so sharply is a worrying sign, particularly if it is replicated in other leading indicators," said Ian Stannard, currency strategist at BNP Paribas. At 1519 GMT, sterling was down 0.3 percent against the dollar at $1.5223.
The euro, however, fell 0.6 percent to 87.69 pence, close to an earlier six-week low of 87.62 pence. The euro has come under broad selling pressure due to growing concerns about how Greece will fund its large debt, causing the yield spread between 10-year Greek and German government bonds to widen to a new euro lifetime high.
Technical analysts said the euro went through key support at 88.10, the 61.8 percent retracement of the rally since January, with the next support at the February 2010 lows around 86.58 pence. The pound's gains versus the euro helped propel its trade-weighted index to a six-week high of 78.8, though it edged back to 78.7 by the 1500 GMT fixing. Some analysts expressed surprise at the speed of the recent fall in euro/sterling, however, and said the scope for further losses may be limited. The euro has fallen around 4 percent since it hit a 2010 high of 91.50 at the beginning of March.
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