* Germany approves Greek bailout deal, helping euro
* Traders say month-end flows also lift euro
* Concerns about UK economy, monetary easing remain
* Events next week could mean pound breaks recent range
By Philip Baillie
LONDON, Nov 30 Sterling fell to a five-week low
against a broadly firmer euro on Friday after approval of the
latest bailout deal by German lawmakers, while concerns about
the UK economy left it vulnerable.
The euro rose 0.4 percent against sterling,
hitting a five-week high of 81.325 pence. Traders said it was
helped by month-end demand for euros from corporates and some
European central banks.
Further gains could see the euro target October's high of
"It is very much a euro story that is driving euro/sterling
higher," said Arne Lohmann-Rasmussen, head of FX research at
"We see a continuous tightening of peripheral spreads for
Italy and Spain over the last week, and the political will with
respect to Greece has limited the downside for the euro".
The euro has gained as a deal to release aid funds to Greece
was agreed earlier this week, causing borrowing costs for other
indebted countries like Spain and Italy to fall.
German lawmakers on Friday approved the bailout deal by a
large majority, helping the euro's cause.
Against the dollar, the pound was down 0.1
percent at $1.6018, slipping well below an earlier one-month
high of $1.6062.
Traders said events next week had the potential to help
sterling break the recent range of $1.5880-$1.6050.
Bank of England and European Central Bank policy meetings
next week could provide direction for the pound, while the UK's
half-year budget statement could provide clarity on the UK's
Bleak economic data has boosted the argument for monetary
easing by the BoE, or quantitative easing (QE), and this is
likely to cap any rallies in sterling against the dollar. QE is
seen as negative for the pound as it increases its supply.
BoE Governor Mervyn King on Thursday flagged an
"exceptionally challenging" environment in the UK economy, a
factor likely to boost the case for a weaker pound to stimulate
But strategists said concerns about the euro zone growth and
economic reforms may also curb the gains for the euro.
Tom Levinson, currency strategist at ING said euro/sterling
could move towards 81.60 pence but he warned any reemergence of
euro zone debt worries could see investors resume buying
sterling as an alternative to the euro.