Sterling steadied versus the dollar and euro on Monday, with investors looking to data for clues on whether last week's UK interest rate cut was the start of an aggressive loosening cycle.
Data at 0930 GMT is expected to show higher oil costs are pushing up producer input prices, plus growing evidence of firms trying to pass this on in higher output prices.
If a strong reading from the November PPI is coupled with upbeat trade and labour market data later in the week, investors may trim their bets that the Bank of England will soon follow up last week's 25 basis point rate cut to 5.50 percent with more moves.
Nonetheless, with 55 out of 62 economists polled by Reuters last week forecasting another cut by the end of the first quarter, sterling could struggle to make much progress against other major currencies.
"Sterling has been very reactive to the data, so I think it will get pushed around by near-term data ... I'd say the trade numbers and the labour numbers are going to be reasonably upbeat and give sterling a bit of a boost," said Peter Frank, currency strategist at Societe Generale.
Trading could become quite volatile as market volumes thin before the year-end, he added.
By 0818 GMT sterling was up 0.1 percent at $2.0334, while the euro was a touch weaker at 72.04 pence.
On the BoE's trade-weighted basis, sterling opened at 100.00, recovering from last week's 1-1/2 year lows of 99.6.
Annual input price inflation is expected to pick up to 9.1 percent in November, its highest since July 2006, while output prices are seen rising by 4.2 percent year-on-year.
A survey from the British Retail Consortium, released on Monday, showed that concerns about the economy have topped Britons' worry list for the first time in more than four years.
Source Supplied by Reuters
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