March 26, 2010 / 9:18 AM / 9 years ago

Sterling falls vs euro after Greek aid plan agreed

* Sterling falls vs broadly stronger euro * Euro boosted by EU agreement on Greece assistance plan * Sterling to stay weak after UK budget, politics

LONDON, March 26 (Reuters) - Sterling slipped against the euro on Friday after a European Union agreement to help Greece tackle its debt problems boosted the single European currency across the board.

Losses against the euro kept sterling on the back foot against the dollar, while analysts said broad demand to sell sterling persisted in the aftermath of the UK government’s budget announced earlier this week.

“The budget was unambitious in terms of fiscal reduction, they’ve made it clear this year is too early to rein in spending,” said Chris Turner, currency analyst at ING in London.

“That’s the backdrop that’s going to keep sterling weak.”

By 0900 GMT, the euro EURGBP=D4 had climbed 0.6 percent on the day to 90.26 pence, pulling further away from a one-month low of 88.78 pence hit on Thursday.

The euro gained broadly after EU leaders said on Thursday that Athens would receive coordinated bilateral loans from other euro zone countries and money from the International Monetary Fund it if faced severe difficulties. [ID:nLDE62N2R1]

By analysts were sceptical of how such a plan would be executed, adding the market may be inclined to sell into the euro’s rally.

Technical analysts added that the euro may struggle to extend significant gains beyond the 90.20 region, where both the 14- and 21-day moving averages lay on Friday.

Sterling GBP=D4 fell as low as $1.4808 in early London trade, little changed on the day but falling from a session high of $1.4894 hit earlier in the day. The pound is on track to slide around 1 percent against the dollar this week.


Analysts expected sterling to stay under selling pressure after a UK budget unveiled this week did little to quell concerns about Britain’s mounting deficit or the outcome of a looming election.

Analysts are also unconvinced Wednesday’s budget will help the ruling Labour Party increase public support and narrow the Conservative Party’s lead ahead of a vote expected in early May, after which a hung parliament remains a real possibility.

Most polls point to such an outcome, where no party has a majority — an uncomfortable scenario which markets fear could leave a government without the clout to make the unpopular spending cuts needed to bring down record public debt.

The Conservatives still lag Labour in crucial marginal constituencies they must win to secure a clear-cut election victory, an Ipsos MORI poll commissioned by Reuters showed on Thursday. [ID:nLDE62O1F5]

Mounting worries about the UK’s high debts have pushed the pound around 8 percent lower against the dollar so far this year.

Reporting by Naomi Tajitsu, editing by Nigel Stephenson

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