Sept 21 Reuters - Sterling held near four-week lows on Tuesday as investors evaluated the direction the Bank of England would take at an upcoming policy meeting, while broader risk sentiment remained under pressure due to Chinese property company Evergrande's debt troubles.
The pound gained 0.2% in the Early London trading and gained $1.3687, moving marginally up from the previous day's low of $1.364 - its weakest level since Aug 23. Some analysts cited the next support for the pound at its August low of $1.3602.
In an important week for monetary policy, the BoE and Federal Reserve are among a dozen central banks hosting their meetings who kept major currencies confined to their well-defined ranges.
The market mood is cautious about potential economic repercussions from Evergrande's debt problems.
The pound was caught up in the sell-off across the financial markets on Monday, although weak data tempering hawkish expectations for Thursday's monetary policy meeting added to the currency's woes.
Though no rate hikes are expected from the BoE until early 2022, investors had begun pricing in an end to the bank's Pandemic-era stimulus and sought commentary on policy tightening.
We believe that the current pricing of the BoE is in general too optimistic, said Esther Reichelt, an emerging exchange and foreign derivative analyst at Commerzbank.
Sterling would not appreciate by much, she added, saying that the first rate hike in six months seems quite apt given high uncertainties around the development of inflation and pandemic, as well as possible Brexit fallout. The central bank will have to take into account the recent batch of economic data that showed retail sales eased for the fourth straight month in August, while inflation jumped with rising gas prices expected to add to price pressures.
Against the Euro, the British currency was slightly stronger at 85.66 pence, but still hovered around a two-week low.