Sterling rose against the dollar and euro on Monday, as investors were on edge ahead of U.S. inflation data and the European Central Bank’s meeting later in the week.
The pound was last up 0.29% against the dollar to $1.2777, after easing 0.15% on Friday.
Sterling has taken a 2% tumble against the greenback in the last three months. While the re-election of Donald Trump as president boosted the American currency in recent weeks, for the year to date, the pound is up 0.40%.
Even though investors were still waiting for U.S. consumer price data on Wednesday, markets have priced in a quarter-point interest rate cut by the Federal Reserve next week as a near certainty.
In Europe, investors were looking ahead to the ECB policy meeting this Thursday, where a quarter point cut is priced in.
“There is little doubt that the ECB will deliver a widely anticipated 25bp rate cut, which will bring the deposit rate down to 3%,” said UniCredit analysts.
Sterling strengthened against the euro on Monday, up 0.12% at 0.8282 pence. The single currency has lost more than 4% against the pound since the start of the year.
Michael Brown, senior research strategist at Pepperstone, saw little opportunity for sustained gains for the pound on its home turf.
“The macroeconomic backdrop certainly doesn’t support much by way of significant further gains for the pound”.
“We had reports out this morning that now job vacancies are at their lowest level in over four years in November. And of course, that comes as unemployment ticks higher and as inflation remains pretty stubbornly high here in the UK,” Brown added.
Demand for workers in Britain collapsed last month after the new Labour government’s first budget, which raised employers’ social security contributions, a survey published on Monday showed.