THE pound has lost further ground against sterling, trading down to 102.67p, with market dealers forecasting that it could decline further in the short term. As sterling gained ground on European markets yesterday, the Irish currency slipped back from 102.83p on Monday and is now as its lowest level so far this year.

Sterling rose from DM2.2540 to DM2.2674, despite fears about the political impact of the Scott report, due later this week, and also gained slightly against the US dollar. In Dublin, trading was fairly subdued and the strength of sterling sent the pound lower.

The decline comes despite recent forecasts that the pound could be heading for 104p sterling and opinion is divided about where the pound/sterling rate is now heading.

Much will depend on the trend in sterling and how the political difficulties of Mr Major's government will affect the currency's value. Much of the uncertainty may have already been priced in to sterling's value, although some analysts believe the British currency could still be undermined by political factors.

In Dublin, forecasts that the pound would head to 104p or higher are based on the stronger performance of the Irish economy compared to with Britain, but some dealers believe the pound could stay in the 102.5p to 103p range.

Meanwhile, Bank of England governor Mr Eddie George said any differences with British Chancellor of the Exchequer, Mr Kenneth Clarke on monetary policy were narrow and technical.

Speaking ahead of publication on Wednesday of the Bank's latest quarterly Inflation Report, Mr George also said short term price pressures were entirely benign".

But he warned that inflationary pressures might strengthen later in the year as consumer spending accelerated and Britain's key export markets picked up.