The Pound strengthened against the Dollar and Euro on Monday, as investors remained cautious ahead of US inflation data and the European Central Bank's meeting later in the week.

Sterling rose 0.29% against the Dollar to $1.2777, recovering from a 0.15% decline on Friday.

Over the past three months, the Pound has dropped 2% against the Dollar. While the re-election of Donald Trump has recently strengthened the US currency, the Pound has gained 0.40% year-to-date. 

Despite anticipation around US consumer price data due on Wednesday, markets have largely factored in a quarter-point interest rate cut by the Federal Reserve next week as highly likely, Reuters reports.

Whereas in Europe, investors were focused on the ECB policy meeting scheduled for Thursday, with markets anticipating a quarter-point rate cut.

“There is little doubt that the ECB will deliver a widely anticipated 25bp rate cut, which will bring the deposit rate down to 3%,” said UniCredit analysts.

The Pound gained ground against the Euro on Monday, rising 0.12% to 0.8282 pence.  Since the start of the year, the Euro has fallen over 4% against Sterling.

However, Michael Brown, senior research strategist at Pepperstone, expressed scepticism about the Pound's potential for lasting gains domestically.

“The macroeconomic backdrop certainly doesn't support much by way of significant further gains for the Pound.

“We had reports out this morning that now job vacancies are at their lowest level in over four years in November. And of course, that comes as unemployment ticks higher and as inflation remains pretty stubbornly high here in the UK,” Brown went on to add.

Demand for workers in Britain plummeted last month following the new Labour government's first budget, which increased employers' social security contributions, according to a survey released on Monday.

Furthermore, the Recruitment and Employment Confederation (REC) and KPMG reported that their staff demand index dropped to 43.9, marking its lowest level since August 2020.

The Bank of England is widely anticipated to keep interest rates unchanged at its upcoming meeting on 19th December.