LONDON (Reuters) – Sterling strengthened marginally against the euro on Tuesday, clinging to gains made on Monday while pulling away from a three-month low hit last week.
Sterling was last 0.01% firmer at 83.610 pence against the euro, retaining Monday’s 0.7% gain after the prospect of more sanctions against Russia knocked the euro.
Versus the dollar the pound was last up 0.09% at $1.313.
“For now, money markets are embedding five more (UK interest rate) hikes by the end of the year, which is likely offering some support to GBP in the background,” ING analysts said in a note.
Money markets are pricing in nearly 140 basis points of cumulative rate hikes from the Bank of England by the end of 2022.
“That said, adverse energy developments caused by new sanctions might take a toll on GBP this week, and cable could make a decisive move below 1.3100 by the weekend.”
With important UK economic data not due for weeks yet, markets are turning an eye to any signals from the Bank of England on monetary policy, with the central bank’s chief economist Huw Pill due to speak on Thursday.
(Reporting by Lucy Raitano in London; Editing by Saikat Chatterjee and Mark Potter)
