STERLING hovered near a three-and-a half-week low against the dollar yesterday, as UK inflation data showed a sharper slowdown than expected – though analysts said investors were focused more on the labour market.

Having fallen on Tuesday after a jump in the dollar, the pound was little moved by the inflation numbers, which investors believe will have little bearing on the rising trend for inflation.

Derek Halpenny at MUFG said strong data from the labour market  – a key determinant of future inflation – was "perhaps more important as it revealed another strong print that in our view reinforces the prospect of a rate hike cycle commencing in the second half of next year".

The pound was at $1.3760, off Tuesday's trough of $1.3726, which was the lowest since July 23.

Against the euro, the British currency was up 0.1pc at 85.105 pence but still close to two-week lows.

Reuters