The pound slipped back against the deutschmark yesterday as the German currency gained ground after stronger-than-expected economic data. As a result, the pound also gained slightly against sterling after the British currency slipped almost three pfennigs. It closed at 92.60p against sterling in late trade from 92.12p on Tuesday and at DM2.6689 from DM2.6895. The D-mark was boosted after the president of the Bundesbank, Dr Hans Tietmeyer, said that he welcomed the corrections in favour of the D-mark in recent days. He also said that the German central bank was worried by prices but could not yet talk of a general inflation threat.

In addition, German industrial output data showed a country beginning to grow strongly. Pan-German industrial output was up 3.5 per cent from June and 5.9 per cent year-on-year, well ahead of forecasts.

Dr Dan McLaughlin, chief economist at Riada Stockbrokers, said the data had put the prospect of a German interest rate increase back on the agenda.