LONDON, Nov. 17 (MNI) - Sterling retained a buoyant tone through early European morning trade, with reported euro-sterling M&A related sales providing the main drive. The release of stronger than expected UK inflation data provided cable with a boost but was not enough to retest overnight New York highs at $1.6879, with the resulting corrective pullback stretching down to $1.6775 with the move influenced by euro-dollar slippage. Euro-sterling was holding off extended lows ahead of the New York open, but retained an underlying heavy tone.

STERLING SUMMARY: Opened early Europe at $1.6832, stg0.8885

of $1.6879. The initial pressure on the dollar into Asia allowed the rate to push up to $1.6846. The early risk on tone quickly faded as Asian equity markets moved into negative territory, ignoring the late Wall Street rally, and Aussie reacted negatively to the RBA Minutes. Cable dropped back to $1.6798. The rate was recovering ahead of the European open, with momentum increasing into the session to take it through the overnight high and on to $1.6860. The move was driven by reported euro-sterling M&A sell interest, which swamped decent demand. The cross had opened Asia at stg0.8896, off NY lows of stg0.8873, edging to highs at stg0.89075 before slipping back. The rate eased to retest NY lows, breaking the 200 day m/a at stg0.8868 to take it to stg0.8849. Cable stretched the recovery to $1.6865, easing to $1.6845 into UK CPI data. Strong numbers saw rate lift to $1.6873 before reversing to retest overnight lows as the rate tracked euro-dollar slippage.

UK: Reported comments from UK officials Tuesday, * BOE SENTANCE: Comments in Bloomberg interview - UK indicators suggest economy growing in second half. - Exact timing of when growth resumes uncertain. - Now in recovery phase, must nurture low inflation growth - Will still feel like a recession for a while to come. - Funding conditions for corporations, banks has improved. - Unsure of QE policy lag, should impact going into 2010. - Inflation may be more of a risk further out - Not yet in position to consider tighter policy - Econ needs to recover momentum before tightening

UK: Press pick-ups in the UK Tuesday, * UK PRESS: "Slash and burn" spending cuts could sentence the UK to a decade as a Japanese-style "zombie economy," TUC general secretary Brendan Barber warns, the Guardian reports. Speaking at the TUC's Beyond Crisis conference in London, about how to kick-start the UK economy, Barber said tackling the public deficit prematurely could choke off recovery before it begins, the paper says. * UK PRESS: Attorneys representing the estate of Lehman Brothers filed a lawsuit on Monday against Barclays Capital, seeking to claw back as much as $10bn that it claims was transferred to the UK bank last year in the frenzied days following Lehman's bankruptcy, the FT reports. * UK PRESS: The latest Guardian/ICM poll shows the UK Conservatives holding their lead. The Conservatives are on 42% to Labour's 29% - enough to give the Tories a clear majority at the next election. The Lib Dem's are on 19%, with "Others" sitting on 10%. * UK PRESS: UK shoppers will spend less this Christmas for the first time since the late 1980s, as sales of non-food items fall by a massive stg 1.3bn, retail experts predicted, the Independent reports. Total sales over the festive season will decline because of low levels of housing transactions that will affect home-related sales, deflation in categories such as electricals, and the capacity that has come out of the market from retail failures over the past year, the consultancy Verdict said, the paper notes.

UK: Data released in the UK Tuesday, * Oct CPI +0.2% m/m; +1.5% y/y; median +0.1% m/m; +1.4% y/y - Oct RPIX +0.3% m/m; +1.9% y/y; median +1.8% y/y - Oct RPI +0.3% m/m; -0.8% y/y; median +0.1% m/m; -1.0% y/y - Consumer prices rose 0.2% m/m in Oct pushing inflation up to 1.5% from 1.1% in Sept. The increase was a little higher than the median forecast. Transport had the largest upward impact due to petrol prices which fell this year but by less than the very sharp fall a year ago. There was also upward pressure from second hand cars and air transport. Other areas pushing inflation up were recreation and culture and food. Core inflation also ticked up to 1.9% in Oct from 1.8% in Sep. Both RPI and RPIX were a little higher than expected also. Once again inflation has topped expectations which has been the trend this year. The BOE has forecast CPI to rise in Q4 and peak at around 2.5% in Q1 2010 and it is too early to tell whether this will be breached yet.

- John Webb London bureau (44 207) 634 1628 jwebb@marketnews.com

Rates in London Trading TIME EURO-USD USD-YEN CABLE EURO-YEN EURO-STG 0600 GMT 1.4955 89.08 1.6832 133.22 0.8885 0700 GMT 1.4958 89.05 1.6828 133.20 0.8888 0800 GMT 1.4965 88.86 1.6855 132.97 0.8878 0900 GMT 1.4947 88.85 1.6850 132.80 0.8870 1000 GMT 1.4945 89.01 1.6856 133.02 0.8866 1100 GMT 1.4906 89.08 1.6805 132.77 0.8970