LONDON, Nov 1 Reuters - The pound slipped on Monday, touching its lowest in more than two weeks against the dollar, pressured by uncertainty over the Bank of England's policy stance and an escalating post-Brexit spat with France over fish.
Robust German and U.S. inflation last week caused aggressive re-pricing of interest rate bets in those markets. A weekly t-bill auction fetched an average yield of 0.216773%, compared to 0.135% at last week's sale.
FX investors have become more concerned about the inflation backdrop in the context of numerous central banks' hawkish shifts. This has, in turn, reduced risk appetite levels and the extent of upward pressure on sterling dollar, said Stephen Gallo, head of European FX strategy at BMO Capital markets.
That meant BoE hawkishness is unlikely to translate directly into pound appreciation versus the dollar in the current environment, he added.
Sterling fell 0.2% by 0900 GMT, at $1.3657, and against the euro it fell 0.3% at 84.7 pence, moving further off the 20-month high of 84.03 pence hit last week.
Most expect the BoE to raise rates by 15 basis points to 0.25% on Nov. 4, although a split vote is likely and some even reckon the bank may hold fire, contenting itself with a hawkish signal.
On Monday, Britain warned France to back down within 48 hours or face legal action.
The UK ministers are also discussing the repercussions of triggering Article 16, which allows the UK to stop following some parts of the Northern Ireland Protocol under the Brexit agreement.