Sterling rose against the euro on Monday as concerns about the health of peripheral eurozone countries weighed on the single currency, prompting investors to trim long euro positions. Better-than-expected construction sector activity data also helped sterling, but analysts said the possibility of additional monetary easing measures to support the UK economy left the pound vulnerable to further falls.
By 1517 GMT, the euro was down 0.8 percent versus sterling at 86.43 pence. The euro reversed gains during Asian trade which took it as high as 87.58 pence, its highest level since May 21, helped by Asian reserve manager demand. Sterling was up around 0.15 percent versus the dollar at $1.5840 though it stayed below last week's high of $1.5924, its strongest since early August.
Traders said investors reduced long euro positions after the single currency hit a 6-1/2-month high against the dollar above $1.38 on electronic trading platform EBS. Irish central bank comments that Ireland's economy would crawl almost to a halt also dented euro sentiment. The latest positioning data from the Commodity Futures Trading Commission showed speculators' bets in favour of the euro increased nearly sevenfold in the week to September 28, while sterling short positions were also reduced. Data showed activity in Britain's construction sector picked up in September.