Sterling slipped against a firmer euro on Thursday as traders cited the ECB buying Portuguese and Irish debt, helping to calm jitters over the eurozone periphery and lend support the ailing single currency. Traders said sterling price action continued to be driven by eurozone sovereign risk sentiment.
The premium investors demand to buy Portuguese and Irish debt over German benchmarks fell on Thursday with traders saying the European Central Bank had been buying the two countries' bonds. The euro traded at 84.70 pence, close to a session high and up around 0.7 percent on the day. It had fallen to a two-month low on Wednesday of 83.34 as the euro came under broad selling pressure. Versus the dollar, sterling traded down around 0.4 percent at $1.5565, having slipped to a two-month low of $1.5485 on Tuesday, but traders said focus was very much on the euro.
"Sterling against the dollar is very much a sideshow at the moment but it should be well supported in the $1.5500 area," said Schmidt at Lloyds. Technically however, a break of $1.5500 would be the trigger for further weakness. Given broader USD bullish signals, we are ultimately looking for a break below 1.5500 to trigger weakness to 1.5300/50.