Sterling fell on Tuesday after hitting a seven-week high against the dollar as dovish remarks by Bank of England policymaker Adam Posen wiped out gains made after firmer UK retail sales and current account data. Posen said the central bank should start pumping more money into the economy in order to prevent Britain falling into the kind of slump Japan did in the 1990s.
The remarks helped push the pound to the day's lows of $1.5718 on selling led by short-term players, traders said. By 1512 GMT, sterling was at $1.5787, down 0.2 percent on the day. Sterling's recovery from its 2010 low hit in May topped out just shy of the $1.60 level in August.
The euro firmed broadly, pushing it up 1 percent against the pound in late trade to hit 85.92 pence, its highest since May, and above the 200-day moving average of 85.89 pence, which it has not traded above since April. BoE policymaker Andrew Sentance said in comments published on Tuesday there was no need for the central bank to restart quantitative easing. Sentance has voted for an interest rate hike for four months running.
The pound was also supported by a broad dollar fall on speculation the US Federal Reserve would add more liquidity to the banking system at its November meeting. Earlier, sterling hit $1.5896, its highest level since August 10, after UK retail sales came in much higher than expected, according to data from the Confederation of British Industry.