Sterling hit its lowest in nearly three months versus the dollar on Wednesday as soft data continued to support the case for further interest rate cuts soon from the Bank of England.

Soft inflation data on Tuesday fed into bearishness on the UK currency, fanning expectations that the BoE is to lower rates further, adding to a cut earlier this month to 5.5 percent.

Investors will look to minutes from the BoE's December Monetary Policy Committee meeting at 0930 GMT for further clues on the outlook for rates.

Analysts polled by Reuters forecast that six policymakers had voted for a cut with the remaining three voting for no change. If more voted for a cut, then prospects for more rate cuts will be boosted, and the pound is likely to be hit.

"People have been predicting a fairly close outcome in the vote so if it's 9-0 or 8-1 the pound should come under more pressure," said Naeem Wahid, currency strategist at Bank of Scotland Treasury Services.

At 0818 GMT the pound was down 0.2 percent at $2.0105, having touched $2.0095, its lowest since Sept. 25. The euro was up 0.1 percent at 71.58 pence
Continuing uncertainty over the future of mortgage lender Northern Rock  continues to weigh on prospects for the UK economy and sterling.

Britain's largest mortgage lender Bradford & Bingley  denied that it was actively pursuing a bid for any part of the troubled lender.

The BBC reported that Bradford & Bingley had approached Northern Rock about certain assets, sending shares in the beleaguered bank up over 5 percent in early trade. 

Source supplied by Reuters