Sterling is expected to gain as UK growth figures boost speculation that the Bank of England's hand will be forced on rising interest rates.

The pound hit a three week high against the euro yesterday, rising to 67.70p on the single currency from 67.69p previously, and traded at
$1.9689 from $1.9694 previously.

Data last week showed that both consumer prices and retail inflation have risen, while figures released Monday showed that house price inflation has hit a four year high.

"The strength in the housing market is clearly supportive of another rate hike in the UK," Hans Guenter Redeker of BNP Paribas told Bloomberg. "It's pretty clear to us the pound is going up to $2."

Three-month interest rate futures were trading up one percentage point yesterday at 5.75 per cent.  Over the past decade, the index has averaged 15 points above interest rates.