Sterling held steady on Monday ahead of the UK inflation data for April, which is due out this week.

The pound remained the same as the previous session, closing at $1.2704, after rising around 2% so far in May. The dollar has declined due to weak growth and inflation statistics, whilst UK data has been stronger than forecast.

Wednesday’s data is predicted to show that Britain’s headline rate of inflation dropped to 2.1% last month, a sharp fall from 3.2% in March, due to a decline in the cap on household energy bills, Reuters reports.

Inflation reached a peak of 11.1% in October 2022, but has decreased over the past few months, conveying lower energy prices and a food inflation slowdown.

“Wednesday's CPI (consumer price index) print in the UK will be a pivotal moment for the Pound,” according to Francesco Pesole, ING FX strategist.

“Our economics team thinks that services inflation will come slightly hotter than the BoE's forecast, which should tilt the balance in favour of August for the first cut.”

As it stands, markets forecast the Bank of England will cut rates twice in 2024, likely getting underway in August.

According to pricing in derivatives markets, traders predict a 55% chance of the first cut happening in June.

Furthermore, deputy governor of the Bank of England, Ben Broadbent, said it was “possible” that a rate cut would take place over the coming months, likely “sometime over the summer.” 

The Euro was flat against the Sterling at 85.55 pence at the time of writing after trading around that level for a month.

Additionally of note this week is survey-based economic data for the UK, scheduled for release on Thursday, which is anticipated to indicate continued growth in May.