Sterling dips after strong rally as traders await fresh impetus
By Harry Robertson
LONDON, July 23 (Reuters) -The pound fell slightly on Tuesday, slipping further from last week's one-year high, as investors waited for U.S. inflation data on Friday to shake up subdued currency markets.
Sterling was last 0.1% lower against the dollar GBP=D3 at $1.2924, after hitting its highest level last week since July 2023 at $1.3044.
The pound was little changed versus the euro EURGBP=D3 at 84.18 pence.
The dollar index =USD was little changed on Tuesday as investors awaited U.S. personal consumption expenditure (PCE) inflation data, the Federal Reserve's preferred measure, on Friday.
Britain has had the best performing currency against the dollar this year as stickier-than-expected services inflation data caused the Bank of England to postpone interest rate cuts, keeping yields on UK bonds at attractive levels.
The Labour Party's landslide election victory on July 4 has also raised hopes among some investors for greater political stability after a chaotic few years under the Conservatives.
However, Chris Turner, global head of markets at ING, said he expected the pound to fall later in the year as the BoE eventually lowers borrowing costs.
"We are still officially looking for three BoE rate cuts this year... and when the UK data allows it, we think sterling will come lower," Turner said.
"The 1 August MPC (Monetary Policy Committee) rate meeting will also be the first big opportunity since the UK election to hear what the BoE are really thinking."
Currency speculators expect more short-term gains for the pound, however, with net bets on a rise in sterling hitting an all-time high of $10.77 billion last week GBPNETUSD=.
Graphic: World FX rates in 2023 http://tmsnrt.rs/2egbfVh
Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
Reporting by Harry Robertson
Editing by Gareth Jones
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