April 9, 2010 / 8:22 AM / 9 years ago

Sterling at 7-week high vs euro

* Robust UK data boosts the pound * Greek uncertainty weighs on euro

* Latest UK opinion polls show political uncertainty

By Neal Armstrong

LONDON, April 9 (Reuters) - Sterling hit a seven-week high versus the euro on Friday as the pound was supported on this week’s robust UK data and the single currency remained vulnerable to worries over Greece.

Thursday’s data showing UK industrial output rose 0.5 percent in February, together with National Institute of Economic and Social Research saying the economy grew 0.4 percent in the first quarter of 2010, were boosting sterling sentiment.

The euro has been pressured on uncertainty over an aid package for Greece, prompting spreads of Greek bonds over German benchmarks to widen to record levels.

Updated forecasts from the Organisation for Economic Co-operation and Development released on Wednesday, projecting the UK would see the second fastest rate of growth over the second quarter of the year in the G7, were another positive factor for the pound.

“The euro is still vulnerable to worries over Greece and UK data has been better than expected, so sterling is outperforming,” said Jane Foley, research director at Forex.com.

“Sterling is still undervalued versus the euro at these levels,” she said.

At 0809 GMT, the euro EURGBP=D4 was trading close to earlier lows of 87.26 pence. Sterling also rose to a three-week high against the dollar of $1.5366.

Traders said stops were targeted above $1.5320, with demand for sterling coming from east-European and U.S. names.

Uncertainty over the UK political outlook, with polls showing no one UK party will win an overall majority in a general election on May 6, were however limiting sterling gains.

The latest Sun YouGov poll put the opposition Conservatives 9 points ahead of Labour, which would make it the largest party in a 650-seat parliament but deny it an overall majority. [nUKPOLLS10]

Investors have sold sterling over recent months as a government with no clear majority is likely to struggle to take quick action to reduce the UK’s yawning public finances.

UK producer prices data is due at 0830 GMT. “Year-on-year input prices will remain elevated around 7% in March. The figures are unlikely to provide fresh fx direction.” said analysts at Credit Agricole in a note. ECONGB

Editing by Ruth Pitchford

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