The sterling fell against the U.S. dollar on Monday as the greenback recovered from its tumble late last week. This comes as investors continue to gauge what potential further Bank of England interest rate hikes could mean for the British currency.
The pound was down by 0.18% at $1.2669 on Monday, losing a fraction of its 0.63% gain against the American currency on Friday when U.S. inflation data came in softer than expected. Against the euro, the pound remained relatively unchanged at 85.94 pence.
While the pound stumbled at the start of this week, the British currency proved to be a strong performer throughout the first half of the year.
During the first six months of 2023, the sterling gained 4.8% against the dollar. This came amid anticipation that British interest rates would remain higher for longer in the face of resilient inflation.
“The outlook for sterling is a battle between relatively high yields and poor growth prospects,” Paul Robson, head of G10 FX strategy at NatWest, remarked.