Forexpros – The pound advanced to a 16-month high against the broadly weaker euro on Thursday, as concerns over euro zone sovereign funding intensified following an auction of French government debt and after unexpectedly strong U.K. service sector data.
EUR/GBP hit 0.8256 during European late morning trade, the pair’s lowest since September 2010; the pair subsequently consolidated at 0.8260, shedding 0.30%.
The pair was likely to find support at 0.8201, the low of September 8, 2010 and resistance at 0.8288, the session high.
The euro’s losses came after France sold EUR4.02 billion of 10-year bonds at an average yield of 3.29%, compared with 3.18% at a similar auction last month. Bids exceeded the amount sold 1.6 times, down sharply from a bid-to-cover ratio of 3.1 in December.
France is seen as vulnerable to losing its triple-A credit rating in the coming weeks, after it was put on negative watch by ratings agencies Standard & Poor’s and Fitch’s in December, amid concerns over the handling of the financial crisis in the euro zone.
Concerns over the health of the European banking sector also weighed on the single currency.
In the U.K., a report earlier showed that service sector activity unexpectedly accelerated to a five-month high in December, easing concerns that growth in the country’s economy is faltering.
Markit’s U.K. service sector purchasing managers’ index rose to 54.0 last month, its highest level since July, confounding expectations for a decline to 51.6.
Elsewhere, the pound was lower against the U.S. dollar, with GBP/USD shedding 0.43% to hit 1.5550.
Also Thursday, official data showed that German retail sales dropped unexpectedly in November, declining for the second consecutive month.
A separate report showed that euro zone industrial new orders rose less-than-expected in October, while September’s figure was revised down sharply.
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