Sterling fell from a recent three week high versus the euro on Tuesday and held steady against a weakening dollar after British data showed December retail sales dropped at their fastest annual pace in nearly two years. The weak British Retail Consortium (BRC) figures prevented the pound from gaining much ground against the dollar, which had extended its pullback from seven-week highs against the euro on Tuesday.
"Cable (sterling/dollar) hasn't followed the euro higher, so sterling is independently quite weak," said Adam Cole, senior currency strategist at Royal Bank of Canada in London.
"The catalyst for sterling to sell off was really the BRC sales number," said Cole.
At 1500 GMT sterling was down roughly 0.5 percent on the day at 70.03 pence per euro, compared with a high of 69.65 pence on Monday, its highest level since December 22. Against the dollar, sterling traded at $1.8782, steady from the previous day's close.
The dollar was down 0.5 percent against the euro at $1.3148, as investors braced themselves for Wednesday's release of US trade data.
The euro gained after the German ZEW institute released its investor confidence survey, which at 26.9 in January was much higher than expected. Analysts had forecast a rise to 17.0 from 14.4 in December.
Meanwhile, retailing lobby BRC said UK retail sales measured on a like-for-like basis fell 0.4 percent on the year last month, their worst year-on-year performance since March 2003.
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