Sterling showed little reaction to data showing UK factory output in October posted its biggest drop since June, although the numbers reinforced concerns the economy will shrink again in the final quarter of 2012 having just exited recession. "For euro/sterling we have had more of a euro move in reaction to the ECB meeting on Thursday but sterling has been quite resilient in terms of UK data even though production was worse than expected," said Saeed Amen, FX strategist at Nomura.
The euro fell 0.2 percent to 80.59 pence, having earlier hit a low of 80.45 pence, its lowest level since November 22. Market players reported bids at 80.30 pence that could cap further losses. The shared currency weakened broadly after the Bundesbank cut German growth forecasts. The report came a day after the European Central Bank predicted the euro zone economy would likely shrink next year, leaving the door open for future interest rate cuts and sending the euro broadly lower.
Comments from ECB Governing Council member Jozef Makuch saying the ECB may cut interest rates next year if the euro zone economy does not improve put the euro under further pressure. "Generally speaking we are quite bullish euro/sterling given the weak (economic) fundamentals for the pound," said George Saravelos, FX strategist at Deutsche Bank. Sterling fell 0.2 percent to $1.6020 retreating from a one-month high of $1.6131 hit on Tuesday.