Sterling slipped to a one-month low versus a firm euro on Tuesday as investors remained downbeat about the prospects for the UK economy and fretted about the chances of more bad news from the banking sector.

Shares in Barclays Capital (BARC.L: Quote, Profile, Research) fell 3.5 percent in early trade, dragging down other stocks in the sector, after Britain's third largest bank raised its 2007 write-down of risky assets to 1.6 billion pounds ($3.1 billion).

That, coupled with the British government bringing troubled mortgage lender Northern Rock under public ownership, added to worries about the health of UK's dominant financial industry.

Meanwhile, expectations for further growth-boosting rate cuts from the Bank of England were unaltered by Monday's comments from Monetary Policy Committee member Timothy Besley. Despite his status as a hawk, there was little in his speech to suggest he opposed this month's easing to 5.25 percent.

"Sterling's continuing the negative theme. People were categorising the Northern Rock story as one catalyst yesterday and certainly the Besley comments didn't seem to indicate any reluctance on his part to further rate cuts," said Jeremy Stretch, strategist at Rabobank.

"Generally, sterling negative news is continuing to build -- we've seen that in speculative positioning and until we get some good news sterling is going to remain relatively friendless."

By 0813 GMT, the euro had risen as high as 75.49 pence -- its strongest in a month, and closing in on mid-January's record highs of 76.13 pence.

The pound was steady at $1.9531, but opened at a one-month low against a trade-weighted currency basket, at 95.30.

Short sterling futures are pricing in three more BoE rate cuts by year end.

Further input on the likely path of future monetary policy may come from MPC member Kate Barker's speech at 1835 GMT on Tuesday and minutes from the bank's February meeting the following day.

Sourced by Reuters.