Sterling resisted a further decline through the 2.06 level against the dollar on Monday and tested levels above 2.07 in US trade. The Euro continued to hit resistance beyond 0.72 against the UK currency and a recovery in risk appetite provided some support to Sterling in Asia on Tuesday. Market conditions remained choppy with Sterling still struggling above 2.07 against the dollar.
Comments from Bank of England officials will be watched very closely this week to assess whether there will be majority support for an interest rate cut in December. Bank of England member Bean stated on Monday that a tighter policy may be required for a while given underlying inflation pressures.
Two further MPC members are due to speak on Tuesday and comments from Sentence could be particularly important given his hawkish policy stance this year. Any expression of unease over the UK economy would tend to weaken Sterling while a concentration on inflation would provide temporary relief. The MPC members will also testify to the UK Parliament Treasury committee on Thursday and there comments are likely to be crucial for near-term interest rate expectations