LONDON, April 21 Reuters Sterling held its ground against the dollar on Wednesday as traders assumed a rise in inflation in March would have little impact on monetary policy and waited for crucial activity and retail sales data due at the end of the week.

Consumer price inflation rose to 0.7 in March after dipping to just 0.4 in February, as global oil prices rose and retailers scaled back their COVIDdriven discounts.

CPI isnt a story that will be driving sterling in the short term, said Jeremy Stretch, a foreign exchange strategist at CIBC Financial markets.

Financial markets see about a 50 chance of a quarterpoint increase in interest rates by the Bank of England by the end of next year, but many economists think it might take longer for the BoE to move.

In the short term, Stretch said, investors will focus on Fridays UK Composite Purchasing Managers Index to gauge the strength of Britains economic recovery.

The pound was up 0.01 at 1.3939 at 0836 GMT, sitting in striking distance of the 1.40 mark it crossed on Monday for the first time in nearly a month.

Sterling also rose about 0.2 against the euro to 0.8620 pence.

Sterling has been among the best performing in the G10 group of currencies this year as investors hope Britains rapid pace of vaccinations will lead to a strong economic rebound from the countrys worst economic contraction in 300 years.

Analysts at Rabobank wrote on Tuesday that the rise on the currency may soon resume due to positive economic…