Sterling has been tipped for further gains after reports showed that house price growth has continued unabated and suggested economic expansion will be the fastest since 2004.

As of 07:00 GMT on Monday, sterling was valued at $1.9746, the highest point since December 1st, and at 65.68p versus the euro.

The currency has risen more than two per cent since the Bank of England
(BoE) announced a surprise interest rate rise on January 11th, with further rises predicted.

"Current rate expectations and continued speculation on BoE tightening are enough to justify further strength," Commerzbank strategist Cersten Fritsch told Bloomberg. 

Any falls "we would see as a buying opportunity", he added, predicting a
$2.05 pound and a 65p euro by mid-2007.

Despite two interest rate rises during the second half of 2006 inflation has continued to run almost a point over policy makers' target-rate.

Higher factory and house prices alongside growing utility costs have
caused the BoE to act pre-emptively against the risk of wage rises.