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FX round-up: Sterling rises as rate cut hopes wane

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Date: Thursday 14 Feb 2008

LONDON (ShareCast) - Sterling moved ahead on Wednesday as the Bank of England suggested that inflation could surge if interest rates are cut too far.

In its latest quarterly inflation assessment, the bank forecasts indicated inflation could stay well above its 2% target for two years if rates were cut to 4.5% by the end of this year.

But inflation would hit its target rate if rates stayed at around the current level of 5.25%, it added.

Economists suggested this could mean one more rate cut this year rather than the three some had been predicting. The news boosted the pounds appeal.

The dollar was mixed as data showed retail sales rose unexpectedly in January. Sales rose 0.3% in January against expectations of a 0.3% fall.

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