Sterling stages modest recovery from 5-1/2-year low

LONDON: Sterling edged up from a 5-1/2-year-low against the dollar on Monday, taking a breather from a brutal sell-off that has seen it emerge as one of the worst performing major currencies this year.

The pound has fallen as expectations for when the Bank of England will start raising interest rates have been pushed back to 2017. Investors had previously bet rates would rise in the second half of this year, following the U.S. Federal Reserve, which last month hiked rates for the first time since 2006.

Uncertainty stemming from a referendum on whether or not Britain should stay in the European Union has also soured sentiment, and is likely to any gains capped.

The latest data shows speculators have been adding to unfavourable bets against the pound, which posted its seventh straight week of losses against the euro on Friday.

Sterling rose 0.3 percent on Monday to $1.4563,, having fallen to $1.4491 in early trade, a level not seen since June 2010. Against the euro, the pound hit a 11-month low of 75.55 pence per euro in early trade, before recovering to trade at 74.73 pence.

"We are once again witnessing the currency suffer from a complete lack of investor attraction," said FXTM Chief Market Analyst Jameel Ahmad.

"Traders should ... see the potential around a possible Brexit vote as a huge risk ... There would be all sorts of risks for investors to consider with this, including threats of capital outflow and concerns that enterprises would threaten vacating UK operations."

The spotlight is on this week's BoE monetary policy meeting. The minutes are expected to repeat December's dovish message, with soft oil prices keeping inflation weak and wage growth rather subdued.

Traders said there is a slight risk that the sole member in the nine-member committee who has voted to raise interest rates in the past could change his vote, a move that would weigh on sterling.

"The (minutes) give us the opportunity to get additional insights about members' views on the UK economic outlook and future decisions, especially with the "Brexit" referendum looming and sterling testing its lowest levels since June 2010," said Sakis Paraskevov, senior analyst at IronFX Global.

A poor run of sentiment surveys have also underlined fears over Britain's broader economic outlook.