LONDON, Jan 13 - Sterling stepped off the previous session's 11-year high against the dollar on Tuesday and lost a little bit of ground versus the euro as investors looked for a moderate reading of Britain's manufacturing output. November industrial production and manufacturing data were due out at 0930 GMT, and expected to show a monthly increase but at a slower pace than in October. However, analysts said that only a substantial deterioration would cut into expectations of further interest rate hikes in the UK. Markets were also focusing on external factors, mainly a speech by Federal Reserve Chairman Alan Greenspan, who gives a lecture on globalisation in Berlin at 1600 GMT.
"We are looking for a slight slowdown in manufacturing. If we get a significant slowdown, this would have an impact on sterling, and euro/sterling would go higher," said David Mann, foreign exchange strategist at Standard Chartered in London. "Other things that will dominate markets include Greenspan." At 0855 GMT sterling traded at $1.8482 , slightly higher on the day but off by about a cent from its highest level since September 1992 set on Monday. It was a touch weaker versus the euro at 69.12 pence but still close to a two-month high set at 68.93 pence on Monday. Manufacturing output is seen rising 0.3 percent in November from the previous month, after leaping a full percentage point in October, its biggest monthly rise since July last year. The broader measure of industrial production is expected up 0.3 percent month-on-month, for an annual rise of 1.1 percent. The Bank of England is expected to raise interest rates in February, from the current level of 3.75 percent, according to a recent poll. The survey also showed UK rates peaking at between 4.5 and 4.75 percent, and hitting this top either this year or next. "Markets are fully pricing in rates at 4.5 percent by the end of 2004," said Mann.///www..com