Broadly weak euro lifts sterling from record low
The pound was lifted from recent record lows hit against the euro on Tuesday, with the single currency feeling pressure from poor European bank news and a failure to push above $1.59.
But weak fundamentals for the pound remained as a string of poor data continued to paint a downbeat picture of Britain's economy.
The euro retreated from a record high of 79.82 pence in profit-taking hastened by news that European bank UBS had announced an additional $19 billion of writedowns.
Deutsche Bank also said it expects to write down a larger than forecast $4 billion on the value of loans and assets in the first quarter.
Despite stock market resilience to the banking news, currency investors were alert to it highlighting the global nature of current credit-market woes.
"It's worth remembering that the pretext of the credit problems may have started in the U.S., but by the very nature of securitisation the problem has been passed around," Rabobank Strategist Jeremy Stretch said.
"It's a case of assessing where the losses will be crystallised," he added.
By 0746 GMT, the euro was down almost 0.4 percent against the pound at 79.33 pence, retreating from Monday's peak, while sterling was down 0.4 percent at $1.9746.
Data on Monday showed British house prices fell for the sixth straight month in March, while figures due at 0830 GMT are expected to show manufacturing growth slowed, with the PMI index seen falling to 51.0 in March from 51.3 the pervious month.
While the Bank of England is struggling to find a balance between rising inflation and slowing growth, analysts said the poor data trend could stoke calls for a UK interest rate cut from the current 5.25 percent sooner rather than later.
"The trend is towards weaker data. If we were to see a PMI number under 50 then the pressure on sterling would become more amplified. Sterling is very much the dollar's ugly sister," Rabobank's Stretch said.
Sourced by Reuters.