Sterling dipped against the euro on Wednesday as safe haven flows into the UK currency eased, and looked vulnerable against the dollar as investors awaited the outcome of Greek elections on the weekend. The common currency edged up 0.3 percent against the pound to 80.53 pence. It recovered from a two-week low of 80.11 pence hit on Tuesday when investors sought alternatives to the euro as Spanish bond yields rose.
Euro/sterling has been hemmed in a range roughly between 81.50 pence and a 3-1/2 year low of 79.50 pence since the start of May, and many market players said it was unlikely to break out before Sunday's Greek vote. Analysts said both the pound and the euro may come under pressure against the safe haven dollar however, on worries a win for anti-bailout parties in the Greek election could increase the possibility of the country leaving the common currency bloc.
Sterling fell 0.2 percent against the dollar to $1.5545, with resistance at the June 6 high of $1.5601. "It's very difficult to see people going extremely long risk or extremely short risk ahead of the weekend," said Raghav Subaru, currency strategist at Barclays Capital. Sterling has looked vulnerable to further falls, especially against the dollar, due to the growing risk the Bank of England will opt for more monetary easing later this year to protect the economy from the effects of the euro zone crisis.