Sterling was largely steady against the Dollar and Euro on Monday, with investors awaiting UK economic growth figures later this week and developments in negotiations over reopening the Strait of Hormuz.
The Pound was last trading less than 0.1% higher against the Dollar at $1.3502 at the time of writing, remaining just below Friday’s three-and-a-half-week peak of $1.35085.
Against the Euro, Sterling was unchanged at 85.62 pence.
Monthly growth data due on Thursday is expected to show that the UK economy remained resilient in June, with stronger-than-anticipated retail sales boosted by World Cup-related spending and unusually warm weather, Reuters news agency reports.
Sterling traders were also monitoring developments in the Middle East over efforts to reopen the Strait of Hormuz, particularly the potential implications for energy prices.
Oil prices edged higher on Monday amid ongoing uncertainty over when the strategic waterway will reopen. Iran said talks with Oman on establishing new shipping routes were nearing completion, but stressed that the US still needed to meet additional conditions.
Furthermore, expectations for Bank of England policy have been closely tied to energy prices, with rising oil costs and their potential impact on inflation typically increasing the likelihood of tighter monetary policy.
Yet the BoE has so far opted to wait for greater clarity on developments in the Middle East rather than tighten policy. This contrasts with the European Central Bank, which raised borrowing costs in June.
Markets are currently pricing in one Bank of England rate hike by the end of the year, with a second increase fully priced in by September next year.
However, ING FX strategist Francesco Pesole believes investors may be taking an overly hawkish view of the BoE’s policy outlook. He warned that a shift away from these expectations could put pressure on Sterling.
“Our view on the Pound is still bearish leaning on the back of our call for no rate hikes and markets still pricing in some tightening,” Pesole stated.