The pound sterling inched higher against both the dollar and the euro on Monday, though it remained close to multi-week lows, as markets continue to focus on the Bank of England's upcoming policy decision and mounting fiscal concerns. Sterling rose 0.3 per cent against the dollar to $1.3452, just above last week's eight-week low of $1.3366. It also gained 0.2 per cent to 86.575 pence per euro after touching a 14-week low last week. Investor sentiment remains cautious following mixed UK economic data. While the labour market showed signs of further cooling, inflation rose unexpectedly to its highest in over a year. A quarter-point rate cut by the Bank of England at its August 7 meeting is almost fully priced in, with markets expecting about 50 basis points of easing by year-end. "The recent underperformance of the pound reflects rising fiscal risk," Goldman Sachs FX strategists said, pointing to growing doubts over the UK government's ability to rein in spending after a rebellion against welfare reforms. Economists expect the government may be forced to raise taxes later this year to meet fiscal targets. Rabobank's Jane Foley noted that market optimism has shifted towards the eurozone, adding, "In view of the UK's fiscal concerns, we continue to favour buying EUR/GBP on dips." Adding to the pressure, Deloitte reported that UK consumer confidence fell to its lowest level since early 2024, amid growing concerns over job security and income. Investors are awaiting retail sales data on Friday and a business activity survey on Thursday for further clues about the economic outlook. Attribution: Reuters Subediting: M. S. Salama
