LONDON: Sterling slipped slightly against the euro on Monday, after comments by European Central Bank policymaker Ewald Nowotny that there was no need to act immediately to counter euro zone disinflation.
ECB chief Mario Draghi said last week radical policy action might be needed if inflation kept undershooting in the near term.
The euro was up 0.1 percent at 82.75 pence, recovering from Friday's low of 82.50 pence, with traders citing offers to sell the euro at 83 pence which could check gains.
Against the dollar, sterling was flat at $1.6580 with investors awaiting a raft of UK data this week before deciding on whether to add to favourable positions or not.
The Bank of England's monetary policy committee (MPC) meets this week but is expected to keep rates steady at record lows.
All three of the closely watched UK surveys of purchasing managers were below forecasts last week, although all are still indicative of an economy growing at a robust pace. Industrial and manufacturing data are due on Tuesday while the trade deficit for February is due on Wednesday.
"The latest PMI data will embolden the doves on the MPC to argue there is no need to raise interest rates this year if growth is slowing to more sustainable levels," said Mansoor Mohiuddin, chief currency strategist at UBS.
"If February's trade data shows the deficit remaining close to record monthly levels around 10 billion pounds, the MPC are likely to stay worried that the economy is not rebalancing away from consumption and imports."
Besides, a wider trade deficit could weigh on the pound.
Sterling has been underpinned by expectations in money markets that currently show investors pricing in a rise in British interest rates sometime in the first quarter of next year.
UK data continues to show a sustainable recovery, though there are doubts over the structure of Britain's economic rebound.
That recovery has so far largely based on consumer credit and rises in housing prices in a handful of markets.
That has to some extent capped the pound's surge since the middle of last year.
It has been stuck in a range between roughly $1.6460 and $1.6820 since the middle of February, with little indication that it will break that range soon.
"The data have remained at robust levels, even if momentum is slowing.
We expect that this will provide continued support to sterling," Morgan Stanley said in a note.
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