Sterling rose against the dollar on Monday, buoyed along with other riskier assets after Greece's parliament approved an austerity bill, bringing the country closer to securing a second bailout and avoiding a chaotic default. Gains were expected to be kept in check, however, with investors wary ahead of a Bank of England inflation report on Wednesday that may give clues on the likelihood of further monetary easing.
The BoE last week pumped another 50 billion pounds into the economy to try to stimulate growth under its quantitative easing (QE) programme. Although the central bank sounded a little less pessimistic about the economy, investors were wary of building bullish bets before Wednesday's report.
"It looks like pressure is on the pound until we get through the Inflation Report on Wednesday morning," said Lee McDarby, head of corporate dealing at Investec Bank. "It wouldn't be surprising to see more QE from the Bank of England in the months ahead".
Sterling was up 0.4 percent against the dollar at $1.5804, buoyed by the improved risk appetite that also lifted the euro, riskier currencies and equities. Doubts remained, however, over whether Greece can cope with more austerity, particularly after violence in Athens overnight.
The pound faced technical resistance at the February 8 high of $1.5929 and the 200-day moving average, currently at $1.5928. Morgan Stanley analysts told clients that they aimed to sell sterling at higher levels towards $1.5960, with a target of $1.5460.
The euro was up 0.2 percent at 83.85 pence, edging close to Friday's high of 84.06 pence. Just above there is the late January high of 84.09 pence, which is the euro's strongest since late December. "Further quantitative easing and large exposures into a weak and uncertain euro zone make us cautious on the outlook for sterling," they said in a note.