Sterling holds ground vs dollar before Fed
Sterling was a touch firmer against the dollar on Tuesday, but analysts expected it to trade in a tight range as investors await the outcome of the Federal Reserve's policy-setting meeting and key data this week.
The Fed's two-day meeting starts later in the day and markets are pricing in another 50 basis point cut in the U.S. fed funds from 3.5 percent, following last week's emergency 75 basis point rate reduction.
"The market is really going for 50 bps from the Fed, I think we'll probably get that," said Geoff Kendrick, currency strategist at Westpac. "It's a massive week this week with (U.S.) GDP and Fed tomorrow and payrolls and ISM (manufacturing data) on Friday."
At 0835 GMT sterling was trading at $1.9854, up a from around $1.9838 late in New York on Monday, while the euro slipped about 0.3 percent to 74.30 pence.
Against the Japanese currency, the pound was at 211.62 yen, off about 0.2 percent.
Sterling has been under pressure in the last few weeks as a flow of negative news on the UK economy convinced investors that the Bank of England will have to cut interest rates.
Markets are pricing in another four rate cuts this year to 4.5 percent despite expectations for a spike in inflation. Earlier this week, central bank policymaker David Blanchflower said the BoE needed to stop worrying about inflation and cut interest rates to prevent a sharp slowdown in growth.
Investors are awaiting the latest retail survey by the Confederation of British Industry due at 1100 GMT and analysts expect the survey to signal a tougher outlook as tighter credit conditions and a slowing housing market constrain demand.
"It's probably a done deal that the BoE will cut rates again next week so anything that can confirm further cuts beyond that ... will be cable negative. But I suspect most of that bad news is already priced," Kendrick added.
Sourced by Reuters.