LONDON: Sterling held near a four-month peak against the dollar on Monday as signs the British economy is improving caused market participants to trim their expectations the Bank of England will ease policy further soon.
Analysts said sterling moves this week would be dictated by the dollar as markets focus on Federal Reserve chairman Ben Bernanke's comments on June 19 after its monthly meeting for clues to the future of the Fed's stimulus programme.
Uncertainty about the US central bank's policy stance has led to wild swings in equities and risky assets and if Bernanke soothes market nerves the dollar could climb broadly.
"The main driver for sterling would be the Fed this week where Bernanke will try and calm markets ... this could lead to some dollar strength which could weigh on cable (sterling/dollar)," said Saeed Amen, currency strategist at Nomura.
"UK data has been quite good and long dollars getting unwound has also helped sterling."
Another focus will be Wednesday's release of minutes of the BoE's June 6 meeting, which will show if departing Governor Mervyn King voted again to increase the BoE's asset purchase from 375 billion pounds.
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