Sterling retreated from three-month highs versus the dollar on Tuesday after a UK house price measure fell to its lowest since the market crashed in 1990, boosting the case for further interest rate cuts.

When adjusted for seasonal factors, the net balance between surveyors seeing price rises and those seeing price falls over the past three months stood at minus 64.1 according to the Royal Institution of Chartered Surveyors, its lowest since June 1990.

Separate data from the British Retail Consortium showed retail sales growing at a modest pace last month, with investors tightening their belts on clothes spending. "The weakness in the RICS and the anecdotal evidence from the BRC raise some cause for concern in terms of recent house price developments ... and we think this dynamic is going to continue to weigh on sterling given the prospects for further rate cuts in the UK," said Phyllis Papadavid, currency strategist at Societe Generale.

"The news has added to our conviction that certainly compared to its G10 counterparts, sterling looks vulnerable."

By 0757 GMT, sterling was buying $2.0070, having retreated from Monday's three-month peak of $2.0220.

The euro edged up to 76.50 pence, moving back towards last week's record peak of 76.92 pence.

However, sterling selling was capped by a general pick up in risk appetite on Tuesday, as equity markets gained, as well as by expectations that UK monetary easing will not be as aggressive as that of the U.S. Federal Reserve.

Markets are pricing in at least another 75 basis points worth of Bank of England rate cuts from 5.25 percent by year-end FSSZ8.

In the United States, the same magnitude of easing -- 75 basis points -- is expected this month alone FEDWATCH.

Sourced by Reuters.