Sterling slipped to a fresh 13-month low against the euro on Wednesday after weak British construction figures boosted views UK interest rates could stay on hold till year-end, in contrast to a hawkish eurozone outlook. The pound also matched a six-month low versus a currency basket hit on Tuesday as a series of softer data cast a shadow over the UK's economic recovery.
The euro rose to 90.28 pence, its highest since late March 2010, after UK construction sector activity grew in April at its slowest pace so far this year, below average forecasts in a Reuters poll. The euro was last up 0.1 percent on the day at 90.05 pence, and analysts said further near-term gains were likely, with the next target at 91.40/50, the March 2010 high and the 61.8 percent retracement of the move down from the 2008 peak.
However, the single currency could be reaching levels that are unsustainable, above its long-term average against the pound, analysts said. The euro has not traded at 92 pence since October 2009. The record high for euro/sterling of around 98 pence was hit in December 2008. The rapid pace of the euro's rise led analysts at CitiFX to establish a short-term sell position at current levels with a target of 87.15/40. Against a broadly weaker the dollar, sterling rose 0.6 percent to $1.6565. The dollar index fell 0.5 percent to 72.758, nearing Monday's 3-year low of 72.722.