Sterling finds some stability above seven-week lows vs dollar

LONDON (Reuters) – The pound held steady against the dollar and the euro on Wednesday, having rebounded from the seven-week lows against the U.S. currency it hit at the start of the week.

Sterling was last at $1.2582 and 85.62 pence per euro with both pairs largely waiting for fresh catalysts to drive activity. Wednesday data showing euro zone inflation slowed to 2.4% in March failed to provide one.

The British currency’s moves against the dollar have been comparatively more dramatic, and the pound dropped to $1.254 on Monday matching Friday’s level, the lowest since mid February.

That was on the back of U.S. economic data that caused markets to pare back the amount of rate cuts they expect by the U.S. Federal Reserve this year, while bringing forward expectations of the first Bank of England rate cut.

“For most of this year, the market has been comfortable with the assumption that the Bank of England would follow both the European Central Bank and the Fed in cutting rates,” said Jane Foley, head of FX strategy at Rabobank.

“It has now begun to revise that, and there are some expectations in the market that the Bank of England will cut in June – it’s our forecast that they will go in August but June is out there – and, at the same time, the markets have begun to pushed back from June in terms of the Fed.”

“That in itself, is obviously something which could undermine cable,” she said, using a common term for the sterling/dollar currency pair.

U.S. jobs data, due Friday, will provide the latest information to shape expectations for the U.S. rate outlook.

Markets currently are pricing a 62% chance of a June Fed rate cut, according to CME’s Fedwatch tool, and roughly a similar chance of a cut then by the Bank of England, according LSEG data.

(Reporting by Alun John; Editing by Toby Chopra)

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