Sterling hit a 2 1/2-month high against the euro on Thursday as investors dumped the single currency on growing speculation that Europe may be expected to offer more debt aid to Greece. Demand from real money and Asian investors boosted the pound while Greece's problems shook confidence in the euro, but sterling gains may be capped as the UK economy faces its own risks, while low interest rates keep returns on UK assets lower than many other currencies.
The pound climbed to 86.11 per euro, its highest since mid-March, after Eurogroup President Jean-Claude Juncker said that should the International Monetary Fund not pay its next tranche of aid to Greece. In late London trade, the euro traded at 86.20 pence. The euro had been on the backfoot for much of the London session, but its break below key support at 86.49 pence, its 100-day moving average, had triggered additional selling.
Sterling traded 0.4 percent higher on the day at $1.6339. Its break above resistance at $1.6289, its 55-day moving average, in earlier trade had pushed it as high as $1.6377. Sterling got a boost from a Citi/YouGov survey which showed UK inflation expectations for the year ahead rose slightly in May after falling in April.