Sterling edged down on Monday ahead of this week’s Bank of England policy meeting in which it is not forecast to slash interest rates but may hint at the timing of the first cut.

Political unrest in France last week shook investors' confidence, leading to a sell-off of French assets and a decline in the Euro, which dropped 0.6% against the Pound.

Yet by Monday, the Euro had regained some stability, increasing by 0.1% against the Pound to reach 84.46 pence.

However, the Pound has performed worse against the Dollar, declining by 0.6% last week, marking its largest weekly drop in two months. At the time of writing, Sterling was down 0.1% at $1.2674.

Recent data indicates that inflation in the United States is not decreasing as rapidly as many had expected, and the Federal Reserve has announced it anticipates only one rate cut this year, Reuters reports.

Meanwhile, headline consumer inflation in the UK is approaching the Bank of England's 2% target. Markets are increasingly convinced that the central bank, which meets on Thursday, will implement two rate cuts this year, with nearly a 90% probability of rates falling to 4.75% by December.

The UK consumer price index (CPI) is set to be released on Wednesday and is anticipated to show a 2.0% increase in the headline rate for May, down from a 2.3% rise in April.

This decline is largely due to a significant drop in household energy bills. However, Bank of England policymakers are placing greater emphasis on wage growth and service-sector inflation.

Data from last week indicated that British wages increased more rapidly than expected. This week's CPI report is projected to show that the services CPI rose at an annual rate of 5.6% in May, down from 5.9% in April.

“Wednesday/Thursday this week should deliver a double-header of negative news for the Pound. Here, UK May services CPI should drop sharply on Wednesday and be followed up a day later with tweaks to the BoE policy statement which hint at an August rate cut,” said ING strategist Chris Turner.