Sterling remained stable on Monday, trading just below its highest level in two months as investors awaited employment and inflation data later in the week.

The Pound gained about 1.4% last week as currencies rebounded against the Dollar, driven by diminishing expectations that US President Donald Trump would aggressively increase tariffs early in his administration.

Better-than-expected growth data also boosted the UK currency, Reuters reports.

Sterling was unchanged at $1.2591 at the time of writing, after briefly surpassing $1.26 on Friday, its highest level since mid-December. Meanwhile, the Euro dropped 0.23% against the Pound, reaching 83.19 pence.

Economic data will be crucial for the Pound this week, following the Bank of England’s interest rate cut earlier this month, though it expressed caution about ongoing price pressures.

Analysts surveyed by Reuters expect Tuesday's data to show a slight increase in average earnings growth for December, while unemployment is anticipated to rise to 4.5% from 4.4% in November.

Wednesday's data is expected to reveal that inflation rose to 2.8% year-on-year in January, up from 2.5% the previous month.

“Sterling's focus this week will be on jobs data, CPI and a speech from Bank of England Governor, Andrew Bailey, tomorrow morning,” stated Chris Turner, global head of markets at ING.

“We continue to doubt that GBP/USD can sustain gains over $1.26 and expect it to be trading back at $1.24 by the end of March.”

Furthermore, investors were closely monitoring developments in the war in Ukraine after Trump surprised European capitals by opening talks about a potential peace agreement with Russia's Vladimir Putin last week.

Over the weekend, Prime Minister Keir Starmer became the first European leader to announce his willingness to send peacekeeping troops to Ukraine.

Moreover, UK sovereign bond yields increased as prices dropped on Monday, with investors anticipating that any peace deal would lead to higher government spending, which would in turn require more borrowing.