LONDON: Sterling struggled on Tuesday, trading near a 14-month low against the dollar, as investors awaited the Bank of England's inflation report and official wage data that could point to interest rates staying low.
If Wednesday's wage data shows subdued growth, as expected, that would bolster expectations that the first rate hike from the Bank of England since 2007 is unlikely to come before the second half of 2015, keeping sterling under pressure.
The quarterly inflation report on the same day is expected to revise down near-term inflation forecasts on lower energy and food prices but with upward revisions to the British central bank's longer-term forecasts.
Economic growth projections might also be tweaked lower to factor in renewed uncertainty from the euro zone, which is facing a slowdown and the threat of deflation, analysts said.
Sterling suffered one of its biggest daily falls against the dollar this year after the August inflation report, which pushed back interest rate hike expectations.
Sterling was flat at $1.5850, edging towards a 14-month trough of $1.5791 hit on Friday, and traders did not expect the pound to push much higher before Wednesday.
The euro was slightly weaker against sterling at 78.30 pence .
"The market should be more sensitive to negative surprises in the wages data," said Jonathan Webb, head of FX strategy at Jefferies. He added that the Inflation Report could have a dovish bias and that would keep the pressure on sterling.
Investors have pushed back expectations for a first rise in British rates from this year into the second half of 2015, sending the pound down 8 percent against the dollar since mid-July. The BoE kept rates unchanged last week.
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