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Sterling holds above 2021 lows before U.S. data

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© Reuters. FILE PHOTO: British Pound Sterling banknotes are stacked in piles at the Money Service Austria company’s headquarters in Vienna, Austria, November 16, 2017. REUTERS/Leonhard Foeger

LONDON (Reuters) – The pound hovered above a 2021 low against the U.S. dollar while it weakened against the euro on Tuesday as investors stayed on the sidelines before U.S. data and a Bank of England policy meeting in which policymakers may keep interest rates on hold.

Money markets are assigning a 58% probability of a 15 bps rate increase next week, down from a nearly 70% probability two weeks ago.

The Bank of England may hold off again next week on becoming the world’s first big central bank to raise interest rates from their pandemic lows, due to the emergence of the Omicron variant of the coronavirus.

Against the dollar, the pound was steady at $1.3241, not far from last week’s 2021 low below $1.32. Versus the euro, the pound 0.2% lower at 85.20 pence.

The U.S. Federal Reserve meets next week, with policymakers flagging in the run-up that an increase in the pace of stimulus tapering was likely, which would set up the possibility of earlier rate rises.

The JOLTS report on U.S. job openings, due later on Wednesday, should provide further evidence of a tightening labour market, potentially adding fodder for bets on earlier Fed tightening. [FRX/]

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