LONDON: Sterling fell against the euro on Monday, continuing last week's decline against the resurgent single currency, with investors looking ahead to British growth data later in the week.
With China's economic and financial market travails throwing doubt over the strength of global growth, some sterling traders are starting to question whether the Bank of England will raise interest rates as soon as many had pencilled in.
Upbeat German business sentiment added fuel to the euro's fire on Monday, pushing the single currency up more than 1 percent to a two-week high of 71.59 pence. Last week, the euro rose nearly 2 percent against sterling, its biggest weekly rise since the week ending May 1.
Sterling was unchanged against the dollar at $1.5515.
Soft British retail sales figures last week set a downbeat tone for sterling, culminating in its biggest weekly fall against the euro - and on a trade-weighted basis - in almost three months.
All eyes are on the first snapshot of second quarter growth on Tuesday, which is expected to show the economy expanded by 0.7 percent in the three months to June, up from 0.4 percent in the first quarter.
"This should help refocus the market on the odds for a more hawkish BoE tone at the August meeting and Inflation Report, with several hawkish dissents a distinct possibility by then," said BNP Paribas FX analysts in a note on Monday.
Last week, BoE governor Mark Carney suggested rates could begin to rise around the turn of year while monetary policy committee member David Miles, once one of the strongest advocates for providing more stimulus, said that the time for a hike was nearing.
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