The dollar slipped against the pound and euro yesterday following a report indicating that euro-zone inflation remained at the upper limits of its target rate during December.

The dollar fell to $1.2935 on the euro during afternoon trading from
$1.2923 24 hours previously and to $1.9702 on the pound from $1.9626.

The EU report showed that inflation remained at 1.9 per cent during December, just below the two per cent target maximum and unchanged from November.

Higher gas costs were the biggest single inflationary driver said Eurostat, followed electricity, rising restaurant prices and vegetables following a poor summer crop.

The dollar is also languishing on expectations that the US Federal
Reserve would remain unchanged for the immediate future.     

These expectations remained unchanged yesterday, despite several economic reports returning results marginally stronger than market predictions.

US futures markets are offering long odds on a an increase in the Fed's
5.25 per cent rate before March but remain less clear about the second quarter.