Sterling fell against the euro on Thursday with the single currency under pressure on concerns was Ireland's debt crisis may spread, while the pound held steady after briefly falling to a one-month low versus the dollar.
Liquidity was thin due to the US Thanksgiving holiday, exacerbating market moves, traders said.
Analysts said parliamentary testimony from Bank of England Governor Mervyn King and other policymakers was relatively balanced and gave little indication about monetary policy going forward. By 1544 GMT, the euro rose 0.2 percent to 84.68 pence, still near Wednesday's low of 84.28, a level not seen since September 21.
Traders said Portugal and increasingly Spain were seen as potentially following Ireland in needing financial help. Ireland's belt-tightening plan has come under fire for sticking to economic growth assumptions unveiled earlier this month that are seen as overly optimistic. "Relative to the euro, sterling should still outperform from here," said Kenneth Broux, market economist at Lloyds Banking Group. Sterling briefly slipped to a one-month low versus the dollar at $1.5737 before steadying around $1.5784. The dollar hit a two-month high versus a currency basket above 80.0.
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