LONDON: Sterling fell on Tuesday with a slight improvement in a monthly business sentiment indicator too little to settle nerves over Britain's economic performance.
A rise in the UK current account deficit to 7 percent of national output has put focus on how exposed Britain is should foreign investors and buyers of its bonds be spooked by a vote to leave the European Union in June.
The PMI monthly survey of purchasing managers in the service sector was up on the previous month, but still suggested the economy has slowed in the first quarter and that the Brexit debate has exacerbated businesses' concerns over the outlook for global growth.
Analysts said broad falls for stock markets on Tuesday were also putting pressure on the pound.
"With equities markets sagging, you can't expect the pound to do too well," said Stephen Gallo, European head of FX strategy at BMO in London.
"The external data published last week raise the risk that the pound could fall further if the polls were to swing more decisively towards a Brexit. It (the current account deficit) is not a good fundamental to be going into the referendum with."
Sterling fell 0.4 percent to $1.4208 and was 0.15 percent lower at 79.07 pence per euro.
The Bank of England's broader indication of sterling's strength, a trade-weighted index against a basket of currencies, stood at 84.4, off a more than two-year low of 84.1 hit on Monday.
The latest poll ahead of the June vote showed the "In" campaign 7 points ahead and bookmakers' odds still point to a roughly 35 percent chance that analysts say is now largely priced in to the pound.
But other polls have been closer and a raft of European political and economic problems threaten to dominate the headlines into the referendum.
Events in Europe - from the Brussels attacks and migrant crisis - could weigh on the debate, hurting sterling.
But Barclays' Hamish Pepper suggested that the euro may begin to suffer against the pound because of political uncertainty.
"The Dutch referendum on the EU-Ukraine Association Agreement may weigh on the euro by highlighting growing European political risk related to the UK's EU referendum," he said, referring to Wednesday's vote on EU-Ukraine relations that is viewed by some as a proxy for EU support in the Netherlands.
"Despite the recent softening of UK data, the euro is too expensive against sterling given that the EU faces greater uncertainty as the UK referendum provides a platform for protest parties to push for their own membership referenda."
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