Sterling slid to a four-month low against a rallying dollar and dipped against the euro on Tuesday, dented by tame UK inflation data. Official data on Tuesday showed cheaper petrol helped to lower the annual rate of consumer price inflation to 2.3 percent from a record 2.5 percent the month before, leaving the door open for a Bank of England interest rate cut next year.
Further clues on the UK interest rate outlook are due on Wednesday with the release of the Bank of England's quarterly inflation report, but analysts said the dollar's sharp rally against major rivals was the overwhelming factor in the pound's fall on Tuesday.
"We are still in a dollar strength environment, and sterling is not spared by the strength in the dollar," said Audrey Childe-Freeman, European economist at CIBC World Markets.
"We are also getting economic data that is negative for sterling - PPI was weaker than expected (on Monday), CPI this morning was weaker than expected."
By 1452 GMT, sterling was down a quarter percent on the day at $1.7340 having earlier hit a low of $1.7305 - its lowest since mid July. Against the euro, sterling was down 0.18 percent at 67.39 pence.
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