Investing.com - The euro fell to fresh three week lows against the pound on Tuesday despite data showing that German economic sentiment improved this month, amid growing expectations for a U.K. vote to remain in the European Union on Thursday.
EUR/GBP hit lows of 0.7668, the weakest level since May 31, down from around 0.7685 earlier.
The ZEW index of German economic sentiment rose by 12.8 points to a reading of 19.2 in June.
Economists had expected the index to decline to 4.7.
The improvement indicated that financial market experts have confidence in the resilience of the German economy.
But Professor Achim Wambach, president of the ZEW institute, warned that general economic conditions remain challenging.
“Apart from the weak global economic dynamics, it is mainly the EU referendum in Great Britain which causes uncertainty," he said.
The ZEW index of euro zone economic sentiment also surprised with an increase to 20.2 in June from 16.8 a month earlier, settling well above forecasts for a drop to 15.3.
EUR/USD was steady at 1.1341 following the report, little changed from earlier.
The pound extended recent gains as opinion polls indicated growing support for a U.K. vote to remain in the EU ahead of Thursday’s referendum.
Two opinion polls released on Monday indicated that support for the 'Remain' campaign had regained its lead over a vote to exit the 28-member bloc.
An ORB poll for the Daily Telegraph newspaper showed that 53% of voters supported the Remain campaign, compared with 46% support for the Leave campaign.
A poll published by NatCen also showed Remain on 53% and Leave at 47%.
But a poll by YouGov for The Times newspaper showed Leave ahead on 44%, with Remain on 42%.
The poll was conducted over the weekend, after the killing of Jo Cox, a Labour Party member and supporter of EU membership.
Investors remained cautious ahead of Thursday’s vote after billionaire George Soros said Tuesday that a Brexit would trigger a bigger and more disruptive sterling devaluation than the fall on Black Wednesday.
Sterling rose to five-and-a-half month highs against the dollar, with GBP/USD hitting peaks of 1.4781, the most since January 4.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.2% to 93.5 ahead of testimony on monetary policy by Federal Reserve Chair Janet Yellen later in the day.