LONDON: Sterling was steady on Monday, holding above recent lows against the dollar and the euro, with investors wary of buying the pound while monetary policy in Britain is expected to remain easy.
The Bank of England (BoE) will release the minutes of its latest Monetary Policy Committee meeting on Wednesday. They are likely to retain a dovish bias after the Bank said two weeks ago that a recent rise in UK gilt yields was unwarranted.
Traders said the minutes would constitute the first step towards preparing investors for a pledge to keep rates low until economic recovery is under way. The guidance is widely expected to released in early August in the Quarterly Inflation Report.
Sterling was flat at $1.5095 holding above the three-year low of $1.4814 struck last Tuesday. Chart support is cited at $1.5077, its July 5 high. Against the euro, sterling was flat at 86.45 pence per euro.
"If the minutes show a shift in the balance of voting towards the doves or little dissent from committing to keeping monetary policy loose then sterling is likely to weaken," said Mansoor Mohiuddin, chief currency strategist at UBS.
Speculators have increased their bets against the pound in the week to July 9, data from the Commodity Futures Trading Commission showed on Friday. Net short positions rose to 34,259 contracts from 31,324 contracts.
Traders are likely to look past British inflation on Tuesday with any spike in consumer prices unlikely to sway the MPC from easing policy further. The annual inflation rate for June is expected to rise to 3 percent from 2.7 percent.
"Overall we see little over this week that would argue against more BoE easing in August - a key driver of our weaker sterling call," BNP Paribas said in a note.
"We remain long euro/sterling via options and have also used the squeeze on long dollar positions last week to initiate a new short pound position, targeting $1.4500."
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