LONDON: Sterling traded flat against a broadly weaker dollar and edged down against the euro on Tuesday, as investors eyed testimony from senior Bank of England (BoE) policymakers for clues on future interest rate rises.
BoE Governor Mark Carney and fellow Monetary Policy Committee (MPC) members Andy Haldane, Kristen Forbes and Gertjan Vlieghe will speak to a Treasury Select Committee in parliament, where they will be asked about the bank's recent quarterly Inflation Report and its stance on monetary policy.
Investors pushed back their expectations for when the BoE would start to raise rates to the end of 2016 after the report this month, which saw the bank cut growth forecasts and sound a dovish tone on inflation, warning of the deflationary impact of a strong currency.
Though the pound was 0.2 percent lower against the euro on Tuesday at 70.49 pence, it was still less than a penny away from a three-month high of 69.82 hit last week and close to an eight-year peak of 69.35 pence touched in July. It was flat against the dollar at $1.5120.
"I think the message (at the Treasury Select Committee) will largely be in line with the Inflation Report, so the thrust of it will be on the dovish side," Societe Generale currency strategist Alvin Tan said.
"But the market is not really expecting the BoE to hike until later next year anyway so I'm not sure that would have a lasting impact on sterling."
On a trade-weighted basis, sterling is still close to this year's 7-1/2-year high.
"We suspect that the BoE's ongoing caution relates...closely to GBP," BNY Mellon strategists wrote in a note to clients. "As more than half all UK exports go to the EU and its euro zone core, sterling's strength against the euro really matters."
"So, as the UK could do without further GBP strength, when Mr Haldane - who made this very point earlier this month - speaks alongside Mr Carney speak this morning, we suspect they will make sure that GBP is being correctly 'calibrated'."
According to a new opinion poll carried out after the Paris attacks for the Independent newspaper, more than half of Britons now want to leave the European Union. But investors at a Reuters summit last week said markets were not yet pricing in the possibility of a Brexit.
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