Sterling held steady against the dollar and euro on Wednesday, with dealers eyeing testimony to UK politicians from Bank of England Governor Mervyn King.

King and four colleagues on the rates-setting Monetary Policy Committee appear before parliament's Treasury Committee at 0915 GMT to discuss the Bank's February inflation report and the re-appointment of Andrew Sentance as a rate-setter.

Money markets remained gummed up -- three-month interbank sterling funds are at their most expensive this year and almost 75 basis points above the Bank's 5.25 percent base rate -- but retail sales in February confounded almost everyone's expectations for a fall and rose 1 percent.

Further restricting the Bank's room for manoeuvre is inflation, which last month hit a nine-month high of 2.5 percent.

"It will be quite interesting to see the balance they strike with regards to inflation and the (economic) slowdown," said Ian Stannard, currency strategist at BNP Paribas in London.

"Inflation is still holding up and could still press higher in the neart term but we're seeing things slow quite rapidly globally, and the spillover efects to the UK could be significant given the UK's exposure to the financial sector," he said.

At 0830 GMT, the pound was down just 0.1 percent on the day at $2.0035 <GBP=>, having rebounded the previous session on the back of a strong equity market rally, while the euro was down 0.1 percent at 77.85 pence <EURGBP=>.

Global stocks rallied earlier this week on hopes the U.S. Federal Reserve's aggressive action to ease stresses in U.S. financial markets is starting to have the desired effect.

As a relatively high-yielding currency, sterling benefitted from investors' increased appetite to take on risk.

But with banks still reluctant to start lending to each other again, sentiment remains very nervous. UK and European equities fell around 0.5 percent in early trade on Wednesday.

Sourced by Reuters.