The pound slipped to trade around a one-month low against the dollar on Tuesday, as investors await Wednesday’s inflation figures and the Bank of England’s interest rate decision the next day.
Sterling was also down slightly against the euro, moving away from a two-year high hit on Friday.
The pound was buffeted last week by swings in the euro and dollar, as global currency markets digested US inflation data, a Federal Reserve meeting and French President Emmanuel Macron’s decision to call early elections.
The euro fell and the dollar strengthened against most currencies as the threat of a far-right government in France drove investors to the safety of the U.S. currency.
Sterling was down 0.17% on Tuesday at $1.2683, while the dollar strengthened against most currencies, just above a one-month low of $1.2658 touched Friday.
Meanwhile, the euro was up very slightly against the pound, at 84.52 pence, after falling 0.6% last week to 83.97 pence.
The BoE’s Monetary Policy Committee (MPC) is expected to leave interest rates at 5.25% on Thursday, but investors will look closely at the accompanying statement for clues on when borrowing costs could decrease.
Consumer price index (CPI) data, due on Wednesday, is expected to show the UK inflation rate fell back to the BoE’s 2% target in May, from 2.3% in April .
“Wednesday’s CPI… will impact market prices that forecast just under two cuts for this year, while on Thursday rates are expected to remain unchanged at 5.25%, with a 72-vote vote of the monetary policy committee,” said Joe Tuckey, head of foreign exchange analysis at brokerage Argentex.
“In the absence of a cut this week, the Monetary Policy Committee will likely wait until the August meeting, when a new inflation estimate will be known.
BoE policymakers remain concerned that inflation for services, which dominate the UK economy, stands at 5.9% and could again put upward pressure on headline inflation in the months to come.
UK general election campaigning ahead of the July 4 vote has had little impact on the pound as both parties pledge to be responsible on taxing and spending after the crisis budget by Liz Truss in 2022.
