After hitting a five-month high of 88.05 last week, sterling edged lower today, held back as concerns about the prospect of more monetary easing in the UK encouraged profit-taking after it failed to hold above the key $1.60 level against the dollar.

However, the pound was not far from an eight-month high hit last week, with traders wary ahead of data due on Tuesday which is expected to show UK inflation staying stubbornly high. British finance minister George Osborne said the government would sanction more money being pumped into the economy if the Bank of England judged more stimulus was needed. Prime Minister David Cameron was also quoted on Monday explaining that monetary policy rather than fiscal policy was the best way of boosting growth. Investors were not moved to take the pound too much lower, however, aware that above-target inflation could dissuade policymakers from opting for another bout of monetary easing. ""With the prospect of renewed QE lurking, the pound is struggling to get a foothold. We will see buyers of dips, although primarily on the fact that the dollar is under severe pressure. Sterling clearly hasn't been comfortable above $1.60 and I think it will struggle to get back above," said Adrian Schmidt, currency strategist at Lloyds Banking Group.