The pound slipped slightly in early trading against the US Dollar but was still close to its strongest versus the euro since February 2020, as investors focused on the possible pace of monetary policy tightening after the Bank of England meeting last week.
In recent weeks, sterling has outperformed as COVID-19 cases have fallen and high vaccination rates have allowed the British government to lift most social-distancing rules.
The pound was down 0.1% versus the dollar, at $1.38645. The dollar had hit a four-month high against the euro during Asian trading, extending Friday’s gains after a strong U.S. jobs report prompted investors to bring forward their bets on the Federal Reserve tapering its pandemic-era stimulus.
On Thursday, the Bank of England’s monetary policy committee voted 7-1 to maintain the pace of its government bond-buying, even though it expects inflation to jump to 4.0% around the end of the year. But it also said that “some modest tightening” of monetary policy over its three-year forecast period was likely to be necessary.
Elsewhere, British business minister Kwasi Kwarteng said that finance minister Rishi Sunak was doing a fantastic job after a report in the Sunday Times that Prime Minister Boris Johnson could demote him.
Sunak is seen as one of the rising stars in the Tory party and a safe pair of hands at the Treasury, such that any demotion could briefly hit GBP.
The UK’s preliminary GDP reading for the second quarter of the year is due on Thursday.