Sterling up versus euro

Sterling hit a two-month high against the euro on Monday as the single currency fell broadly on eurozone debt worries, but it hovered near a seven-week low versus the dollar as investors cut exposure to riskier assets. The euro fell to 86.64 pence, though traders said it later pared losses due to demand from a UK clearer. Further falls could see the single currency target support at the late March low of 86.54 pence and the 100-day moving average at 86.43 pence.
The euro fell broadly on concerns about possible debt restructuring in Greece, a ratings outlook downgrade for Italy and after heavy defeats in regional elections for the ruling parties in Spain and Germany. Sterling was vulnerable versus the dollar, however, as eurozone debt worries prompted investors to slash exposure to riskier currencies and assets. It dropped to as low as $1.6106, just one pip above a seven-week low of $1.6105.
A break below the 100-day average around 86.43 pence would pave the way for a move towards the 200-day average - currently around 85.77 pence - and the March 10 low of 85.34 pence. The euro was last down 0.25 percent at 87.02 pence. "This is very much about the euro, which is coming under pressure across the board. Sterling is benefiting and is set to continue to do so near term," said Geraldine Concagh, economist at AIB Group Treasury in Dublin.
The single currency has lost around 4 percent against the pound since hitting a high of 90.43 pence on May 5. Against the dollar the pound was down 0.7 percent at $1.6118, having broken below its 100-day moving average around $1.6156, which triggered stop-loss orders and accelerated the decline. But it held above support around $1.6100, with traders citing bids around that level and demand from Middle East names.
Below there, more support lies at the 200-day moving average, now at $1.5935, which roughly coincides with the late March low of $1.5937. The latest positioning data from the Commodity Futures Trading Commission showed speculators turned marginally net short on sterling in the latest week. Analysts said that may suggest limited room for further losses as most long sterling positions have already been cut. In the euro, speculators slashed long positions but still held a sizeable net long position, pointing to the possibility of further position adjustment to come. "The fact that the IMM (data) showed sterling positions effectively square as of last Tuesday suggests limited downside at this stage," Lloyds' analysts said in a note.