The German ZEW survey of sentiment in the euro's zone largest economy rose sharply in December to enter positive territory for the first time since May. That helped push the euro up 0.3 percent against the pound to a session high of 80.77 pence. It recovered from a near three-week low of 80.35 pence hit on Monday after investors were unsettled by Italian prime minister Mario Monti's surprise decision to resign early. Some strategists said the pound could be vulnerable to more selling on concerns about weakness in the UK economy.
"Euro/sterling has seen a move on the back of the ZEW, while looking at cable (sterling/dollar) around $1.61, it still seems a little elevated," said Jeremy Stretch, head of FX strategy at CIBC World Markets. Sterling was up 0.2 percent on the day at $1.6115, with technical charts showing support around the 55- and 50-day moving averages at $1.6036 and $1.6023 respectively. Trade-weighted sterling was last at 83.8, within reach of the peak of 84.7 hit in September. A rise above that level would take the index to its highest since November 2008.