The pound was supported by mixed UK PPI data, which investors chose to interpret as inflationary for the future despite soft headline PPI rates. Both output and input producer prices came in below expectations, with output prices up 0.2 pct in June against a 0.3 pct consensus and input prices up 0.6 pct, below the 0.8 pct prediction by analysts. However, these lower headline numbers were somewhat offset by past-month revisions and investor fears about a jump in the yearly rate in input price inflation to 2.1 pct from May's 1.3 pct. "We think it is too soon to conclude that price pressures have peaked," said Paul Dales at Capital Economics. Because of higher oil prices and an upward impact on food prices from the floods in England, input prices may continue to rise. On top of that, Dales noted surveys show companies are eager to pass on costs to the consumer, suggesting inflation may remain high. Although the headline fall in PPI will be welcome at the Bank of England, "as long as the survey measures of price intentions remain high, the BoE is likely to remain concerned about the threat of a further rise in firms' pricing power", Dales said. Elsewhere, the dollar was steady at weak levels against most currencies as some robust US data last week was not enough to convince markets interest rates may go up this year. "Markets hold little fear of either a precipitous US economic slowdown or a resumption of the Fed's tightening cycle," said Steve Pearson at HBOS. This will support risk-seeking trades, leaving the dollar at its current weak levels against most other currencies except the Japanese yen. Used as a funding currency in riskier investments, the yen is expected to remain under pressure as long as global growth prospects look good. Meanwhile, the euro barely reacted to a jump in German industrial production, up 1.9 pct in May, mainly because it followed a 2.1 pct drop in April. "The headline May data appear impressive, but still imply that production in the first two months of the second quarter is 0.9 pct down from the first quarter, which partly helps to explain why the market shrugged off the release," said Stuart Bennett at Calyon.