Sterling drifted lower against the dollar and euro on Tuesday as disappointing British manufacturing data overshadowed broadly sterling-positive mortgage lending and consumer credit data. However, moves were limited as all eyes were focused across the Atlantic on the eve of a US interest rate decision. "From next week sterling will lose its lethargy. Tomorrow really is a US story," said David Mann, at Standard Chartered in London.

Although the weaker-than-expected manufacturing figures jolted sterling slightly lower against the dollar and euro, analysts said sterling would only gain independent dynamism next week.

On Wednesday the US Federal Reserve is widely expected to raise interest rates for the sixth time since June, and only the text accompanying the Fed's decision will be scrutinised for future interest policy surprises.

Investors are still cautious this week ahead of Friday's meeting of the Group of Seven rich industrialised nations in London, and Friday's US jobs data.

At 1540 GMT, sterling was down 0.25 percent on the day at $1.8784. Against the euro, it was also slightly weaker at 69.22 pence.

Copyright Reuters, 2005