Sterling hit a two-month low against the dollar on Wednesday as persistent concerns about a possible Greek exit from the euro prompted investors to sell what they see as riskier currencies, and poor retail sales data added to a shaky UK growth outlook.
The pound climbed versus a broadly weaker euro as hopes a European Union summit might make progress in tackling the debt crisis faded, while sources told Reuters euro zone states have been told to make contingency plans for Greece quitting the currency bloc. Minutes from the BoE's May policy committee meeting showing members voted 8-1 to keep the bank's asset purchases unchanged provided some support for the pound, given some market players had been positioned for a closer vote.
But for several members the decision not to expand the 325 billion pound programme was "finely balanced" and analysts said the minutes left the door firmly open for more quantitative easing later in the year. Against the dollar, sterling was last down 0.4 percent at $1.5703, paring losses after hitting a session low of $1.5677, its lowest since mid-March.
It tracked a sharp fall in the euro, which hit a 22-month trough against the dollar as investors retreated to safe-haven assets. "There's the feeling some people were placing expectations on this summit and we are now seeing a pullback," said Simon Smith, chief economist at FxPro. Smith said dollar strength would continue to push cable lower but the pound should test last week's 3-1/2 year high of 79.50 pence against the euro in coming sessions.
The euro was down 0.5 percent to 80.02 pence.
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