LONDON Sterling held steady on Tuesday after falling nearly 1.5 percent against the dollar since late last week as investors looked to Wednesday's second quarter GDP data for further direction.
The pound was flat against the dollar at $1.55.
The UK currency also steadied against the euro though analysts said it was poised for further gains following below-forecast euro zone economic data.
The euro was at 78.11 pence, staying above a low of 77.56 pence hit on Monday, its weakest since October 2008.
"We're still of the view that euro/sterling will grind a little bit lower, in line with euro weakness," said Peter Kinsella, currency strategist at Commerzbank.
The euro zone's private sector shrank for a sixth successive month in July as manufacturing output nosedived, making it increasingly likely the bloc will slide back into recession, business surveys showed on Tuesday.
But sterling has lost ground against most currencies other than the euro since last Thursday, pulled down by weakness in the euro due to deepening worries over Spain and Greece's debt problems.
Market participants will look to Wednesday's UK economic output figures for direction. Economists predict a 0.2 percent quarter-on-quarter contraction, which would extend Britain's recession into a third quarter.
"The figures have already been priced in, so I don't think it's going to move (sterling) an awful lot barring a significant revision," Kinsella said, adding that he saw dollar/sterling testing $1.53 in the next two or three weeks.
"Sterling has had a terrific run and has broken to fresh highs on a trade-weighted basis, so I'm not surprised to see some pullback because, frankly speaking, the data has not been great."
Last week sterling rose to its highest in nearly three years against a trade-weighted basket of currencies, despite worse-than-expected retail sales for June and above-forecast public sector borrowing figures, which suggested UK economic growth was still at risk.
(Editing by Nigel Stephenson)