Sterling has been tipped to rise against the euro this week as impetus builds behind speculation that the Bank of England (BOE) will be forced to raise rates in the new year.

In currency trading early Monday the pound was valued at 66.94p, from 66.98p on Friday and at $1.9567, from $1.9523.

New data showing an unexpected fall in unemployment over November and rising consumer price inflation had already lifted the pound to a five week euro high last week.

Retail sales, initially predicted to be unchanged, also rose 0.3 per cent in November said the Office of National Statistics, as domestic demand compensated for a US slowdown.

"As long as inflationary pressures persist, the BOE will be keen to continue raising rates," Ian Gunner of Mellon Financial told Bloomberg.

"That's a plus point for sterling."

The implied yield on a June 2007 interest-rate futures contract rose to

5.48 per cent, as traders adjusted their predictions, the biggest one-week gain this year.