Sterling rose against the euro on Thursday and recovered from a two-week low against the dollar, helped by the European Central Bank's surprise decision to cut interest rates, which supported riskier assets. The euro dropped to a session low of 85.74 pence from around 86 pence before the rate decision. That put the common currency on track to fall below November 1 lows of 85.48 pence, and potentially headed towards its October 4 lows of 85.345 pence.
The euro was last trading at 86.10 pence, still down 0.1 percent on the day with traders citing offers above 86.30 and 86.50 pence. The common currency has been volatile for most of the day on speculation that Greece's government was on the brink of collapse and a referendum on a bailout that is crucial for it to avoid default would likely be scrapped.
"We did see a knee-jerk reaction in the euro/sterling pair, but further out this decision to cut rates will be taken as a pre-emptive one which is good for growth and hence should support riskier assets," said Neil Mellor, currency strategist at Bank of New York Mellon.
Against the dollar, sterling was last up 0.3 percent at $1.60, having fallen to $1.5876 earlier in the session - its lowest in two weeks. Beyond support at its 55-day moving average of $1.5880, it is likely to receive some help around $1.5830 - the 38.2 percent retracement of its climb from a low of $1.5270 in early October to its recent high of $1.6167 on October 31. On the topside, traders cited corporate offers above $1.6050 with some resistance at its 100-day moving average at $1.6124. Sterling's gains against the dollar and the euro saw it rise 0.37 percent on a trade-weighted basis to 80.5.
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