Sterling weakens versus dollar but stays close to over three-year high
LONDON, May 27 (Reuters) - The pound ticked lower versus a broadly stronger dollar on Tuesday, yet remained close to a more than three-year high scaled on Monday as reduced bets on Bank of England rate cuts and some brighter economic data lifted the mood.
At 1110 GMT, the pound was down 0.13% against the dollar at 1.35470. , not far from the 1.359 it touched on Tuesday, its highest level against the greenback since February 2022.
The dollar was stronger against a range of currencies on Tuesday as investors took comfort from U.S. President Donald Trump's decision to delay higher tariffs on the European Union while the yen weakened as Japanese bond yields slumped.
But the pound has gained more than 8% against the dollar in 2025 amid erratic U.S. trade policy.
Michael Brown, senior research strategist at Pepperstone said while the pound's recent strength is largely a dollar weakness story, there are a few idiosyncratic factors at play.
"We did have a much more hawkish than expected May policy decision from the BoE, then compounding that we had hotter than expected UK inflation last week which has seen participants continuing to trim their bets on BoE easing this year."
Last week's inflation print erased market expectations for a cut at the Bank of England's next meeting in June.
Bets are now heavily weighted to the BoE keeping the rate steady, with 93.6% of traders expecting that outcome .
The central bank slashed the bank rate by 0.25 percentage points to 4.25% on May 8.
UK economic data has also proved more resilient than expected this year, said Brown.
Figures published on Friday showed British retail sales jumped in April.
Elsewhere, a survey from the British Retail Consortium on Tuesday showed British shop prices fell slightly overall this month but food price inflation accelerated.
Against the euro, the pound was up 0.27% at 83.74 and now in its seventh consecutive week of gains against the single currency.
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