Sterling fell against a broadly stronger euro on Tuesday following an unexpected jump in the UK trade deficit and in anticipation of eurozone help for debt-stricken Greece. Worries over how Greece will finance its public deficit have weighed on the euro, which rose sharply after a senior source in Germany's ruling coalition said eurozone countries had agreed in principle to help Greece.
The pound rose more than a cent against the dollar as the US currency weakened against the euro. Sterling was pressured after Fitch Ratings said Britain was among the most vulnerable countries with a top-notch rating.
Concern intensified that Britain, with its massive budget deficit, may be next in line after speculators targeted heavily indebted eurozone countries such as Greece and Portugal. By 1720 GMT, sterling was up 0.8 percent against the dollar at $1.5722 after hovering around $1.5592 on the Fitch comments. The pound hit an 8-1/2 month low of $1.5535 on Monday.
Fitch also said risks for UK sovereign funding costs were on the rise. Earlier, the trade data pressured the pound as it suggested the economy may not have made much progress although Britain emerged from recession in the final three months of last year.
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