Sterling rebounded on a broadly weaker euro, but the pound remained pressured by concerns about the UK outlook before this week's budget and a general election that looks set to be closely fought. Investors were eyeing Wednesday's budget to be delivered by UK finance minister Alistair Darling, who said on Sunday there would be no pre-election giveaways, promising instead a "sensible", workmanlike, economic plan to support growth and cut borrowing.
Analysts said expectations for an undershoot in public borrowing would be welcome, but not enough to reverse worries over debt, growth and whether the next government would be able to tackle the budget deficit, expected to hit 12 percent of gross domestic product this year.
Traders said speculation of a new bank levy also weighed on the pound. But negative sentiment focused on the euro due to continued wrangling on financial aid to debt-laden Greece, taking the immediate focus off the UK currency, traders said.
By 1612 GMT, the euro fell 0.3 percent at 89.76 pence, slipping from the day's high of 90.45 pence. Against the dollar, sterling was 0.4 percent higher near the day's high of $1.5089. Earlier, it fell to a near two-week low of $1.4933 in holiday-thinned Asian dealing. Traders will keep a close eye on UK inflation figures on Tuesday, with retail sales data scheduled for release on Thursday.