Sterling held near 3-week highs versus the euro on Wednesday, as news that two new Bank of England interest rate setters voted to tighten monetary policy this month was balanced by slower earnings growth.
Minutes from the latest meeting of the nine-strong Monetary Policy Committee showed Timothy Besley and Andrew Sentance had voted for a rate hike, dissenting from the majority decision to hold the cost of borrowing at 4.75 percent.
This was seen as cementing the markets' view that the BoE will raise rates to 5 percent in November. But expectations for further tightening in 2007 were dampened by data showing average earnings growth eased more than forecast to 4.2 percent year-on-year in the three months to August. In the May to July period it was 4.4 percent.
"The earnings numbers are quite soft so there is some degree of comfort there in (terms of) inflation," said Ian Gunner, head of FX research at Mellon Financial Corporation. "But the main news to come is the two new guys on the MPC voting for a rate hike and that's going to keep the market alert for more rate hikes."
By 1414 GMT, sterling was at 66.96 pence to the euro, a three-week high.
Against the dollar it was a touch lower on the day at $1.8679 - having hit a 10 day peak of $1.8739 ahead of the minutes and earnings data.
The softer average earnings growth contrasted with Tuesday's news of higher than expected retail price inflation - the measure on which many UK pay deals are based - last month. This suggests that earnings growth could pick up again in coming months, analysts said.
ABN Amro currency strategist Peter Frank said the earnings data would not trouble the MPC in future pre-emptive rate decisions, arguing that there could be further tightening to come beyond November.
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