Sterling steadies after biggest weekly jump in 2 months, eyes on CPI
By Samuel Indyk
LONDON, July 15 (Reuters) -Sterling steadied against the dollar on Monday after its biggest weekly jump since May last week as markets tempered expectations for an August rate cut from the Bank of England.
Traders were now awaiting UK inflation data on Wednesday for more clues on interest rate policy.
The pound was last down 0.1% against the dollar GBP=D3 at $1.2979. It rose 1.4% last week, its biggest one-week jump since early March on upbeat growth data and commentary from BoE policymakers.
BoE Chief Economist Huw Pill said it was still an "open question" on the timing of the first interest rate cut.
Money market traders have priced in around 12.5 basis points (bps) of easing by the August meeting, implying around a 50% chance the BoE will cut its bank rate by a quarter point next month.
The futures market puts around a 90% chance that the BoE makes a 25 bp move by September.
"There's a question mark over whether the Bank of England can cut rates in August," Rabobank senior FX strategist Jane Foley said.
"Inflation data could be seen by the market as the decisive factor as to whether they do or don't."
Britain's Office for National Statistics releases its consumer price data on Wednesday. Economists polled by Reuters expect headline annual inflation to hold steady at 2%.
"The June CPI report on Wednesday can tilt the balance for a Bank of England rate cut on 1 August," said ING FX strategist Francesco Pesole.
"Given that no BoE speakers are scheduled before the 1 August meeting, there are no strong reasons to expect a major loss of momentum for the pound this week, unless CPI data surprises on the downside," Pesole added.
The pound was down less than 0.1% at 84.08 pence per euro EURGBP=D3.
Graphic: World FX rates in 2023 http://tmsnrt.rs/2egbfVh
Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
Reporting by Samuel Indyk; Editing by Susan Fenton
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