UK pound near strongest against the Euro in early trading


London, Aug 9 - The pound slipped in early trading on Monday, but was still near its strongest against the Euro since February 2020 as investors focused on the possible pace of monetary policy tightening after the Bank of England meeting last week.

In recent weeks, sterling has outperformed as COVID - 19 cases have been lost and high vaccination rates have allowed the British government to lift most social-distancing rules.

The pound has strengthened against the Euro for the last three weeks in a row and reached 84.7 pence per euro on Friday, its strongest since February 2020.

On Monday, at 0801 GMT the pound was down 0.1% against the dollar, at $1.38645. The dollar had hit a four-month high against the Euro during Asian trading, extending Friday's gains after a strong U.S. employment report prompted investors to bring forward their bets on the Federal Reserve taping its pandemic stimulus.

It was out of the Euro by less than 0.1% in 84.76 pence for every euro, and against the euro by 0.3%.

On Thursday, the Board of England's monetary policy committee voted 7-1 to maintain the pace of its government bond buying however it expects inflation to jump to 4.0% around the end of the year. But it also proposed that some modest tightening of monetary policy over its three-year forecast period was likely to be necessary.

The Bank of England's updated outlook and exit guidance essentially aligned with the market view that the time for liftoff has been pulled forward, but the likely glide path will be shallow, wrote Goldman Sachs FX strategists in a client note.

We are upgrading our CEP forecasts for 3 m EUR and 6 m EUR GBP to 0.85; we anticipate the currency to be especially sensitive to anticipated data on inflation and the labor market as the furlough period ends.

Speculators cut their weekly short position on the pound in the week ending Aug. 3, according to net CFTC positioning data, leaving the market's net overall position neutral.

Elsewhere, British business minister Boris Johnson said that finance minister Rishi Sunak had done a fantastic job following a report in Sunday Times that Prime Minister Kwasi Kwarteng could demote him.

Sunak is seen as one of the rising stars in the Tory party and a safe pair of hands at the Treasury, such that any demotion could briefly hit GBP, wrote ING FX strategists.

These are quiet summer markets but FX traders will likely focus their attention on what any fresh inputs mean to the new hawkish policy from the Bank of England.

The economic preliminary GDP reading for the first quarter of 2017 is due on Thursday.