Sterling eased against the euro and the dollar on Tuesday as investors booked profits on the British currency's recent rally ahead of Wednesday's quarterly Inflation Report from the Bank of England. The BoE's assessment of the economy and inflation projections could give clues on whether the next move in British interest rates will be up or down. The central bank has left rates unchanged at 4.75 percent since last August.
Data on Tuesday showed British consumer price inflation held steady at an annualised 1.6 percent in January, in line with expectations but still below the Bank of England's 2 percent target.
"Sterling has been supported by recent strong data but its moves from here will be dominated by what the Inflation Report delivers tomorrow," said Steven Pearson, chief currency strategist at HBOS.
Sterling was down 0.15 percent at $1.8852 at 1545 GMT. It was also around 0.25 percent lower against the euro at 68.80 pence.
The pound's trade-weighted index slipped to 103.4, turning tail from 8-week highs hit on Monday.
Dealers said some sterling bulls had been betting on a stronger inflation number after data on Monday showed a sharp surge in British factory input prices.
The pound showed little reaction to a survey from the Royal Institution of Chartered Surveyors showing British house prices fell in the three months to January but at the slowest rate in four months.
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