LONDON, Nov 15 (Reuters) – Sterling fell against the dollar on Tuesday as investors placed bearish bets on the pound ahead of the Bank of England’s Quarterly Inflation Report, which is expected to be dovish and clear the way for more monetary easing.

Developments in the euro zone also posed downside risks for sterling as another spike in euro zone government bond yields prompted renewed selling of perceived riskier currencies in favour of the more liquid U.S. dollar and the yen.

The pound hit a session low of $1.5812, its lowest level since Oct. 21, extending losses throughout the afternoon with traders citing corporate selling ahead of the Bank of England’s inflation report due on Wednesday.

“A key giveaway in their language would be expectations of UK inflation to be well below target over the next two to three years. Recent history seems to indicate that substantial downward revisions of the (Monetary Policy Committee’s) inflation projection were consistent with more QE by the BoE,” said Valentin Marinov, currency strategist at Citi.

Earlier in the day, sterling dropped ahead of data showing annual consumer price inflation eased to 5.0 percent in October but remained more than double the Bank of England’s target rate. Still, it was below expectations and most analysts and the Bank of England expect price pressures to ease in the coming months.

“The CPI data means people might start thinking it’s a bit easier for the Bank of England to justify more accommodative policy,” said Paul Robson, currency strategist at RBS.

Such speculation is sterling negative as quantitative easing involves flooding the market with pounds to stimulate growth, reducing demand for the UK currency.

LONDON (Reuters) – The euro slipped against the dollar on Monday with nerves ahead of an Italian bond auction undermining initial optimism about the prospect of crisis-fighting reforms under new governments in Italy and Greece.

On Sunday, Italy’s president appointed former European Commissioner Mario Monti to head a new government charged with implementing urgent reforms to end a crisis that has endangered the whole euro zone.

Italy’s 3 billion euro auction of five-year bonds was expected to find buyers, but at a record high yield which underscores the challenges the country’s new technocratic government faces to restore market confidence.

The common currency slipped 0.3 percent to $1.3710 early in the London session as caution weighed ahead of the bond sale. Traders cited sizeable options expiries at $1.3750. Earlier the currency had risen as high as $1.3811 with near term resistance near its two-week high of around $1.3870 and offers from Asian sovereign investors cited above that.

“We stepped back from the brink on Thursday and Friday and the news from Italy just adds to that. The fact that we have these technocratic governments in place is a positive, in that they’ll press toward the sort of austerity measures required,” said Simon Derrick, head of currency research at Bank of New York Mellon.

In Greece, new prime minister Lucas Papademos begins the tough task of rebuilding Greece’s credibility with financial markets by pushing through tough austerity measures needed to stave off bankruptcy.

“After a bit of consolidation we’ll have the euro testing back up, and we’ll be having a look at $1.3850 again in the not- too-distant-future,” Derrick said.

LONDON, Nov 10 (Reuters) – Sterling edged lower against the dollar and underperformed the euro as worries about the euro zone drove investors to shed exposure to riskier currencies, offsetting any relief seen after the Bank of England kept asset purchases on hold.

As expected, the Bank of England voted to keep interest rates at a record low 0.5 percent and opted not to raise the amount set aside for the quantitative easing programme designed to breathe life into the country’s fragile economy.

The decision lent little bias to markets which continued to trade in line with latest developments in the euro zone crisis, where investors sold into bounces in the euro on the long-term view that turmoil in the euro zone would continue.

“A lot of people maybe wanted to be short euro/sterling on the break of 85.00 and we’ve seen some stops done on the move back through it … it’s essentially an unwinding of positions,” said Adrian Schmidt, FX strategist at Lloyds Bank in London.

The euro was up 0.3 percent against the pound at 85.35 pence, having fallen to a fresh eight-month low of 84.86 pence earlier in the day. It recouped some of its steep losses made in the previous day when the common currency came under broad pressure after Italian 10-year bond yields breached 7 percent.

Commerzbank technical analysts highlighted Wednesday’s break below the euro/sterling 200-week moving average of 85.40 pence as a landmark development.

If this is sustained at Friday’s close, the pair may trade down to 83.53 pence — a support line drawn connecting lows hit in mid-2008 and mid-2010. Below that, the 2010 low of 80.67 is a target in one to three months, Commerzbank said.

LONDON, Nov 10 (Reuters) – Sterling edged lower against the dollar and underperformed the euro as worries about the euro zone drove investors to shed exposure to riskier currencies, offsetting any relief seen after the Bank of England kept asset purchases on hold.

As expected, the Bank of England voted to keep interest rates at a record low 0.5 percent and opted not to raise the amount set aside for the quantitative easing programme designed to breathe life into the country’s fragile economy.

The decision lent little bias to markets which continued to trade in line with latest developments in the euro zone crisis, where investors sold into bounces in the euro on the long-term view that turmoil in the euro zone would continue.

“A lot of people maybe wanted to be short euro/sterling on the break of 85.00 and we’ve seen some stops done on the move back through it … it’s essentially an unwinding of positions,” said Adrian Schmidt, FX strategist at Lloyds Bank in London.

The euro was up 0.3 percent against the pound at 85.35 pence, having fallen to a fresh eight-month low of 84.86 pence earlier in the day. It recouped some of its steep losses made in the previous day when the common currency came under broad pressure after Italian 10-year bond yields breached 7 percent.

Commerzbank technical analysts highlighted Wednesday’s break below the euro/sterling 200-week moving average of 85.40 pence as a landmark development.

If this is sustained at Friday’s close, the pair may trade down to 83.53 pence — a support line drawn connecting lows hit in mid-2008 and mid-2010. Below that, the 2010 low of 80.67 is a target in one to three months, Commerzbank said.

LONDON, Nov 10 (Reuters) – Sterling edged higher against the dollar after the Bank of England fulfilled market expectations by keeping interest rates and asset purchases on hold, but the pound slipped versus the euro as the common currency broadly rebounded.

The Bank of England voted to keep interest rates at a record low 0.5 percent and opted not to raise the amount set aside for the quantitative easing programme designed to breathe life into the country’s fragile economy.

This was widely anticipated by the market, and given the BOE did not produce any surprises like expanding its asset purchase plan, it drove the pound slightly stronger versus the dollar at $1.5953. Options expiries were seen at $1.60 and $1.6230, IFR data showed.

The policy decision pushed the focus on to next week’s central bank inflation report which could reveal the extent of weak economic fundamentals in the UK, bringing the increased likelihood of larger asset purchase targets by December.

Despite the increasing chance of fresh cash injections, typically negative for sterling, investors were likely to remain reluctant to build up long euro/sterling positions while the market’s main driver remained the euro zone debt crisis.

“It’s going to be a difficult one to position for… sterling has been jolted around, not by domestic concerns or even QE2 last month, but by what’s gone on in Europe,” said Kathleen Brooks, research director at FOREX.com.

The euro last traded at 85.30 pence, up 0.2 percent on the day, gaining across the board as Italian bond yields stabilised on signs that political deadlock may be easing.

LONDON, Nov 9 (Reuters) – The euro fell against the safe-haven U.S. dollar and Japanese yen on Wednesday as the euro zone’s escalating debt crisis saw investors such as macro funds step up sales of the single currency after Italy’s 10-year bond yield hit 7 percent.

The swift rise in bond yields prompted Paris-based clearing house LCH.Clearnet SA to raise the margin call on Italian bonds this morning, effectively driving the cost of using Italy’s debt to raise funds higher.

Italian bond yields subsequently rose beyond 7 percent, breaking the closely-watched level which economists have long flagged as unsustainable for the euro zone’s largest government bond market.

“Euro/dollar looks incredibly vulnerable at the moment. Everyone has concluded that the only buyer of Italian debt is the ECB… you need a much larger risk premium in the euro and it’s not clear where this is going to end,” said Chris Turner, head of foreign exchange strategy at ING.

Turner said the worsening euro zone sentiment could take the common currency as low as $1.34 in the near term.

The euro sank to a session low of $1.36545 on EBS, off a high of $1.3860 seen in early trade, triggering stops on the way down and breaking through reported option barriers at $1.3750 and $1.3700.

Support for the euro was seen at the Nov. 1 low of $1.3608.

LONDON, Nov 9 (Reuters) – The euro slipped on Wednesday after investors’ confidence in Italy’s already-fragile debt situation was dealt a blow when the cost of using Italian bonds to access funding was hiked by Paris-based clearing house LCH.Clearnet SA.

With Italian bond yields rising quickly towards unsustainable levels, the move to raise the margin call on Italian bonds prompted fresh selling in the single currency, on concern that it could accelerate the region’s debt crisis.

“The decision by LCH Clearnet to boost the margin requirements for Italian bonds… simply exacerbates the situation,” said Stephen Gallo, head of at market analysis Schneider Foreign Exchange.

The move reversed initial optimism generated in Asian trading by the overnight news that Italy’s Prime Minister Silvio Berlusconi would resign after passing urgent budget reforms. Uncertainty over how Italy would form a new government was likely to weigh on the euro in the medium term.

“Whether this is a positive development depends on whether we go to new elections, which the market would see as very bad, or whether we go to a technocrat government which the market would see as much better,” said Steve Barrow, head of G10 currency research at Standard Bank.

The common currency slipped 0.4 percent to $1.3787 , having risen as high as $1.3860 in early trade. It remained well off a nine-month low of $1.3145 hit in early October.

Barrow said the recent range was likely to hold while political uncertainty in Italy and Greece persisted, with officials in the latter still scrambling to form a new government necessary to secure vital aid funding.

LONDON (Reuters) – The euro fell against the Swiss franc after a Swiss central bank official doused expectation of near-term intervention but held steady against the dollar on Tuesday before a vote in the Italian parliament seen likely to approve last year’s budget.

The franc rebounded from an earlier low as investors who had bought the euro in anticipation of the Swiss National Bank raising the floor on the euro/Swiss pair unwound positions.

The reversal came after SNB Vice Chairman Thomas Jordan said it would be wrong to engage in competitive devaluation, pushing euro/Swiss to a session low of 1.2320 francs. The SNB capped the franc at 1.20 francs per euro in September and vowed to defend that level.

“They’re trying to put the emphasis back on the deflationary pressures rather than saying they’re acting for competitive reasons,” Ian Stannard, currency strategist at Morgan Stanley.

Providing resistance to the rise, traders said offers were seen at 1.2460-80 francs. Traders were also watching the October 19 peak of 1.2475 francs and the 55-day moving average at 1.2482, with large option protection seen ahead of 1.2500.

Safe-haven flows were expected to underpin the franc, with Greek political parties struggling to agree on a new prime minister and Italian bond yields rising quickly toward levels seen as unsustainable levels.

The Italian parliamentary vote had raised the prospect of Prime Minister Silvio Berlusconi being toppled, but with opposition parties set to abstain the vote was likely to pass.

LONDON (Reuters) – The euro fell on Monday as the focus of the region’s debt crisis shifted to Italy, with a short-term rebound on speculation Prime Minister Silvio Belusconi could resign reversing when the talk was denied.

The safe-haven Swiss franc tumbled against the euro and the dollar after the Swiss National Bank chairman suggested the franc was still overvalued against the single currency, reviving speculation the SNB may raise the 1.20 franc floor on the euro/Swiss exchange rate.

Analysts said the franc’s recent gains had been driven mainly by euro zone developments, and Swiss policymakers would take that into account before deciding whether to raise the floor. But with data showing deflation in October, the SNB had room to take more measures to weaken the franc.

Investors shifted their focus from Greece’s attempts to get its bailout program back on track to the region’s third largest economy, Italy, where Berlusconi was fighting for his political future.

The euro stood at $1.3755, down 0.3 percent on the day, having recovered from a session low of $1.36818 on reports that Berlusconi may resign that also boosted Italian bond and stock markets. A senior party source said Berlusconi had dismissed the rumors.

“A new government, or another leader could probably have more support from the parliament and bring more reforms,” said Marcus Hettinger, global FX strategist at Credit Suisse.

“(But)from the currency side I don’t see why that would have a long-lasting positive effect. Growth is basically what is needed everywhere to reduce deficits.”

LONDON (Reuters) – The euro rose on Friday as the threat of a destabilizing referendum in Greece looked to have subsided, but stiff technical resistance and the risk of fresh flare-ups in the euro zone’s debt crisis kept a lid on gains.

After a week of volatile trading many speculators were reluctant to open big positions ahead of key U.S. jobs data at 1230 GMT and awaiting the conclusions of the Group of 20 leaders summit taking place in Cannes.

The euro was last 0.25 percent higher at $1.3854, taking it back above the 55-day moving average of $1.3839 which has capped the currency in recent sessions.

The options market continued to show increased worries about the risk of further euro declines, with one-month risk reversals still trading not far from a record high in favor of bets on euro falls versus the dollar.

Traders cited semi-official buying of euro/dollar with speculative accounts targeting stops above Thursday’s peak of$1.3855 up to around $1.3870.

The euro has bounced from a three-week low of $1.3608 on Tuesday, struck after Greek Prime Minister George Papandreou’s sudden call for a referendum sparked concerns the country could reject the bailout plans and instead default on its debt.

On Thursday Papandreou bowed to cabinet rebels and agreed to make way for a national coalition government with the opposition if his Socialists back him in a knife-edge confidence vote on Friday.