Sterling steady at one-month highs as Powell remarks dent dollar
By Amanda Cooper
LONDON, July 10 (Reuters) -The pound held near one-month highs on Wednesday, supported by the belief among investors that U.S. interest rates are set to fall sooner than many had predicted, which dented the dollar.
Two Bank of England policymakers speak later in the day, which may offer the pound more near-term direction.
BoE chief economist Huw Pill and Monetary Policy Committee member Catherine Mann speak at separate events.
The main driver for the sterling/dollar pair on Wednesday came from the dollar side, after Federal Reserve Chair Jerome Powell told lawmakers at his semi-annual testimony the day before that the U.S. is "no longer an overheated economy."
Powell said he did not want to send any signals about the timing of a possible rate action, but investors took his remarks as a sign the central bank is edging closer to its first cut since 2020.
Sterling GBP=D3 was last up 0.16% at $1.2807, having hit a session peak of $1.28455 on Monday, its highest since June 12. It is up 0.4% week-on-week and has gained 1.2% so far in July.
Futures markets show traders are placing a 60% chance of a rate cut at the Bank of England's meeting on Aug. 1, with a cut in September fully priced in. 0#BOEWATCH
As far as sterling is concerned, following the Labour party's widely expected landslide victory in last week's general election, the focus is squarely back on monetary policy, rather than politics.
Thursday's macro calendar includes a reading of economic growth for the three months to May, while next week brings the consumer price index for June.
CPI hit the BoE's 2% target in May, thanks in large part to a drop in food prices.
But a sub-component of service-sector inflation showed price pressures in that part of the economy are still running hot enough to make an August cut less of a done deal.
"We may need to see next week's UK CPI data to obtain new intel, but the UK swaps market price 15 bps of cuts (60% implied) for the 1 August BoE meeting, and 47 bps, or almost two full 25-bp cuts, priced by December," Pepperstone head of research Chris Weston said in a note.
Graphic: World FX rates in 2023 http://tmsnrt.rs/2egbfVh
Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
Reporting by Amanda Cooper; Editing by Arun Koyyur
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