LONDON: Sterling traded flat against the dollar on Monday after recording its first week of losses in four, as investors awaited comments from Federal Reserve officials for further clues on whether U.S. interest rates will be hiked soon.
The dollar rallied on Friday, hitting a one-week high of $1.3239 against sterling, as bets that U.S. rates will rise this year - perhaps as soon as this month - were revived by hawkish comments from Boston Fed President Eric Rosengren.
The pound had been on a winning streak up until last Tuesday, hitting a seven-week high of $1.3445 that left it more than 5 percent up from a three-decade low plumbed in July following Britain's vote to leave the EU.
But it has since fallen around 1.5 percent, having taken a hit last week after Bank of England Governor Mark Carney kept the option of further monetary easing on the table. It traded flat on Monday at $1.3271, close to Friday's low of $1.3239. It was also flat at 84.70 pence per euro.
The BoE meets on Thursday and is not expected to announce new policy measures, having cut interest rates to record lows and reintroduced an asset-purchase programme last month. But investors will be on the look-out for clues about further action in coming months.
"I don't think many people are anticipating much by way of policy this week. November is more likely," said Rabobank currency strategist Jane Foley. "We've had better data, meaning the Bank can stay in wait-and-see mode for at least this month."
"I think Carney will need more justification, in terms of weaker data, before he pulls the trigger (on further policy action)," she added.
Investors' primary focus on Monday will be a speech by Fed Board Governor Lael Brainard, the Fed's most noted dove, with some expecting her to send a signal that monetary tightening is coming.
Money markets are pricing in around a one in four chance that rates will be hiked later this month, according to CME FedWatch, and around a 60 percent chance of a hike by the end of the year.
"Brainard is among the few FOMC members that have not already expressed their view on the outlook for policy ahead of the September meeting," wrote IronFX analyst Charalambos Pissouros.
"As such, we believe that her speech has the potential to influence market expectations for a hike this year, especially considering that she is a permanent voting member of the FOMC."
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