Sterling may continue to gain versus the dollar and euro ahead of official statistics expected to show that factory prices rose to a three month high in December.

The pound was valued at 66p on the euro in early foreign exchange trading on Monday, up from 66.3p and at $1.9592, up from $1.9571.

The surprise increase in interest rates to five per cent on Thursday drove the pound to its highest gains against the euro in more than a year and a half.

Data showing that inflationary pressures continued to run high at the end of 2006 are expected this week, with the markets hedging bets against a further rate rise in March.

"With rate expectation in the UK now on the rise sterling is going to be extremely well supported," analyst Ian Stannard of PNB Paribas told Bloomberg.

"Sterling is one of the most sensitive currencies to changes in interest rate expectations."