Sterling gained on Tuesday after data showed the Britain's trade deficit narrowing more than forecast and a strong rise in UK retail sales. Britain's global goods trade gap narrowed to 6.784 billion pounds in November from 7.016 billion in October, against forecasts for a bigger 7.0 billion pound shortfall, as imports fell 0.8 percent and exports rose 0.1 percent.
"The trade data was mildly positive, though I think the retail sales numbers were more important - they suggest that growth has been reasonable strong," said Paul Robinson, chief sterling strategist at Barclays. At 1516 GMT, the euro was down 0.4 percent at 89.78 pence. It earlier touched a two-week high of 90.28 pence.
Sterling was up 0.3 percent against the dollar at $1.6155, while the pound's trade-weighted index edged up to 79.8 from 79.7 late on Monday. The currency wobbled briefly against the dollar after China surprised markets by raising the proportion of deposits banks must hold in reserve, sparking concerns that China's putting the brakes on its economy may dampen the outlook for global growth. Sterling still faces a number of headwinds, however, which analysts believe may cap any gains, with political uncertainty ahead of a UK election due by June combining with concerns about a ballooning fiscal deficit.
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