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Sterling held steady versus the euro on Wednesday, with investors anticipating a Bank of England interest rate hike to 5 percent on Thursday and looking for clues on whether more tightening is likely in 2007.
UK data released on Wednesday highlighted signs of strength in the economy and potential for inflationary pressures - factors which could increase the likelihood of a Bank of England move to 5.25 percent early next year.
The British Retail Consortium said that shop prices rose at their fastest rate in more than two years in October, whilst a KPMG/Recruitment and Employment Confederation survey showed that growth in permanent staff placements rose to a 2-1/2 year high last month and wage inflation remained strong.
"The recent data sets point to the economy doing well ... Everything points to the Bank of England hiking not just tomorrow, but a few times," said Peter Frank, senior FX strategist at ABN Amro.
"(But) a lot has already been priced in so I think we'd have to get something pretty hawkish from the Bank of England tomorrow for sterling to move a lot higher," he added.
By 1455 GMT, sterling was steady against the euro at 67.06 pence, in sight of the previous week's 15-month high 66.67 pence and up around 2.5 percent for the year-to-date. It held around 103.6 on a trade-weighted basis. Against the dollar, sterling eased by 0.2 percent to $1.9013 as market attentions moved away from the outcome of US mid-term elections, prompting an unwinding of the previous day's dollar sell off.
The BoE rate decision is due at 1200 GMT on Thursday, preceded by UK trade data for September at 0930 GMT. Britain's trade deficit is forecast to have narrowed slightly to 6.5 billion pounds from August's 6.73 billion.

Copyright Reuters, 2006

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