The dollar fell against the British pound Monday as investors looked ahead to two key U.K. data reports due Wednesday that could determine if the pound takes another run higher to the $1.70 level. On Wednesday, the U.K. unemployment rate is expected to tick down to 6.8% from 6.9% for the three months ended March, which would provide more evidence that the labor market is improving. The Bank of England's inflation report for May, also due Wednesday, could shed light on how much spare capacity the bank thinks is left in the economy, a metric used by the bank in assessing the future path of its interest rates. Read more: Key U.K., euro zone data this week "If the employment data do improve as we expect, we think that could be the larger driver of sterling this week as the market continues to romance the idea that the Bank of England could be the first to tighten" among G4 central banks, said Brian Daingerfield, a foreign-exchange strategist at RBS. The G4 central banks are those in the euro zone, Japan, U.K., and U.S. The British pound GBPUSD -0.05% rose to $1.6869 from $1.6848 late Friday. Data showing an improvement in employment could lead to a run on $1.70, said Daingerfield. Comments from European Central Bank officials about the potential for further easing in June continued to attract attention on Monday. ECB President Mario Draghi last week said he would be "comfortable" taking action next month, if needed. His comments, which led to euro losses, came during a news conference after the central bank released a decision announcing no change in interest rates. "Having led us up the garden path this far, it would be disastrous if they didn't deliver on a rate cut," said Shaun Osborne, chief FX strategist at TD Securities, referring to ECB officials. ECB Vice President Vitor Constancio reiterated Monday that any monetary policy decision would hinge on expectations for inflation in the medium term. The ECB targets inflation of just under 2% in the medium term and new staff forecasts will be published at the ECB's June meeting. Ewald Nowotny, a member of the ECB's governing council, said Monday a cut in interest rates won't be enough to fight the region's low inflation, according to Reuters. The euro EURUSD -0.03% was at $1.3758 versus $1.3755 late Friday. A decline below its 100-day moving average of $1.3740 could push the euro to levels last seen in early April, said Osborne. The ICE dollar index DXY +0.01% , which pits the dollar against six other currencies, was at 79.890 versus 79.878 late Friday. The WSJ Dollar Index XX:BUXX +0.05% , which measures the dollar against a wider basket of currencies, was at 72.89 compared with 72.85. The report for U.S. retail sales in April is due at 8:30 a.m. Eastern on Tuesday. The dollar USDJPY +0.20% rose to 102.13 Japanese yen from ¥101.81 late Friday. The dollar-yen moved higher in line with a rise in U.S. Treasury yields, said Osborne of TD Securities. The Australian dollar AUDUSD -0.23% rose to 93.61 U.S. cents from 93.58 U.S. cents. Source: Market Watch
