Sterling falls after Fitch flags UK rating risks

* Sterling falls on Fitch comments about UK rating * Pound trims losses, data shows UK retail, housing improves * UK trade deficit widens, inflation report due on Wednesday

By Naomi Tajitsu

LONDON, Nov 10 (Reuters) - Sterling fell on Tuesday after a ratings agency said highly-indebted Britain was the major economy most at risk of losing its AAA rating.

The pound retreated from a three-month high hit on Monday, after Fitch told Reuters that Britain would have a tougher time than the United States in sustaining its fiscal deficit without impacting interest rates or the currency.

A further significant fiscal stimulus package could put the coveted rating at risk, it said [ID:nT286946].

As the UK government borrows heavily to pull its economy out of recession, its weak fiscal position is an issue that has long plagued sterling, and traders often sell the currency on any suggestion Britain may lose its top-notch rating.

Only Britain, the United States, Germany and France among the major economies are rated AAA and any change could affect the cost of government borrowing.

"Fitch highlighted what the market is fully aware of -- the deterioration in the UK's fiscal position," said Ian Stannard, currency strategist at BNP Paribas in London. "Ratings agencies have been warning that the UK has to get its house in order."