LONDON: Sterling held steady against the dollar and recovered slightly against the euro on Tuesday as markets awaited more clues on monetary policy and the state of the UK economy.
Traders will be watching a speech by Bank of England Governor Mervyn King after the market close for any indication of whether the bank will opt for further monetary stimulus next month, which would likely be negative for the pound.
Preliminary growth data on Thursday will clarify whether the UK economy emerged from recession in the third quarter.
Sterling was steady at $1.6008 against the dollar, pulling away from last week's peak of $1.6178.
It was held back as the euro lost ground against the dollar, hampered by uncertainty over when Spain will seek a bailout and after ratings agency Moody's downgraded five Spanish regions.
The euro was down 0.2 percent at 81.36 pence on Tuesday, retreating from a 5-1/2 month high of 81.65 pence hit on Monday.
Sterling moves were expected to be muted before Thursday's data, expected to show the economy grew 0.6 percent over the quarter after three straight quarters of contraction.
"Growth data would certainly be supportive (for sterling) if it comes in strong," said Simon Smith, head of research at FXPro.
"There will be focus on these numbers ... it will answer the question about whether we have moved out of recession."
However, he did not expect the data to give sustained support to the pound.
The UK economy remains weak and players remain focused on the possibility the BoE will embark on a further round of quantitative easing (QE) in November, even after some better-than-expected economic data last week.
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