Sterling was firm on Monday ahead of UK inflation data and the Bank of England's quarterly report, with expectations for an interest rate rise in the near term providing strong support. Traders said the pound was helped by demand from Middle East accounts. Some also cited sterling-supportive M&A news, with General Electric Co set to buy the well support division of UK energy services company John Wood Group for about $2.8 billion.
Inflation data on Tuesday is expected to show annual CPI jumped to 4.0 percent in January, well above the central bank's 2 percent target. Focus, however, will centre on the BoE's inflation report on Wednesday, where it is expected to revise up near-term inflation projections. Sterling came off lows against the dollar to trade at $1.6010. It held above above the $1.60 level, having closed above there on Friday. Traders said fix-related selling saw the pound fall to a low of $1.5982 earlier in the session.
Against a subdued euro, sterling made solid gains. The euro was down 0.6 percent at 84.12 pence, not far from last week's low of 83.89 pence. The euro was sold across the board. It fell to a three-week low against the dollar as it was hit by fresh worries about Europe's banking system, which weighed on sentiment already depressed by concerns about eurozone peripheral debt.
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