Sterling weakened to five-month lows against the dollar on Monday as worries about the European debt crisis ahead of a key Greek vote on reforms required for further aid curtailed risk appetite and investors bought safe-haven currencies. The pound is likely to stay under pressure in coming days on growing speculation that the Bank of England might resort to more monetary stimulus.
Speculators have already cut long positions in sterling, and in the latest week - to June 21 - they were running net short positions. Sterling was down 0.1 percent at $1.5940 with traders expecting more selling on bounces, which would keep it pinned near its five-month low of $1.5913, hit in Asian trading on Monday. Talk of option barriers at $1.59 and payment of dollar-denominated corporate dividends lent some support.
Near term support is seen near $1.5880 - the 61.6 percent retracement of sterling's rise from a low of $1.5345 in late December to a high of $1.6747 struck in late April. A gloomy outlook on the economy left sterling mired at an eight-month low versus a currency basket. Against the euro, sterling also lost ground with the common currency lifted by a bout of short-covering and signs of progress on a scheme to make private bondholders share the burden of any Greek debt solution. The euro was up 0.1 percent at 88.96 pence, with offers from UK exporters lined up above 89 pence.
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