LONDON, May 15 (Reuters) - Sterling dipped against the euro on Tuesday after better-than-expected German growth data, but stayed close to a 3-1/2 year high as political stalemate in Greece checked demand for the common currency.
Surprisingly strong economic growth in Germany relieved some pressure on the euro, which hit its lowest since November 2008 against the pound on Monday as Greek political parties' failure to agree on a new government left market players fretting the country may exit the euro zone.
Investors were also looking ahead to UK trade data at 0830 GMT, which was forecast to show the trade deficit shrinking slightly, although analysts said movements in sterling would be dominated by events in the euro zone.
The euro was last up 0.3 percent at 79.93 pence, paring losses from Monday when it sank to a 3-1/2 year low of 79.63 pence.
Against the dollar, sterling was steady at $1.6097.
"We are in quite a risky environment at the moment given what is happening in Greece...so sterling has almost become a safe haven," said Steve Barrow, head of G10 research at Standard Bank.
Analysts expected the euro to slide further under pressure from the Greek political crisis, which could see its bailout plan scrapped and the country forced to leave the euro zone, although the bloc's finance ministers dismissed on Monday evening talk of a Greek exit.
"Today we backed up a little bit with the German GDP coming through a little firmer than expectations but I don't see that as a game changer. Our longer term target is 75 pence over the next year," Standard Bank's Barrow said.
The next focus for investors will be the Bank of England's quarterly inflation report on Wednesday, in which the central bank will give its latest UK growth and inflation forecasts. (Editing by Nigel Stephenson)
