By Jaspreet Kalra
August 27 (Reuters) -Sterling slipped on Wednesday as the U.S. dollar firmed against major currencies, recouping losses spurred by investor worries over independence of the U.S. Federal Reserve while traders also digested UK’s producer price inflation data.
The UK unit was down 0.33% at $1.3434, trailing a fall in the euro which declined 0.5% to $1.1584.
While the dollar had initially weakened on Tuesday following U.S. President Donald Trump’s move to oust Fed Governor Lisa Cook over alleged improprieties in obtaining mortgage loans, that reaction was shortlived, and the greenback was last up 0.3% at 98.6 against a basket of peers.
On the month, sterling remains on course to end higher by about 1.5% against the U.S. dollar, comforted by a pullback in expectations of rate cuts by the Bank of England and buoyant economic data.
“A more persistent hold on Bank Rate is appropriate right now, to maintain the tight – but not tighter – monetary policy stance needed to lean against inflation persistence persisting,” Bank of England Monetary Policy Committee member Catherine Mann said in remarks released by the BoE on Tuesday.
British producer output price inflation rose to a two-year peak of 1.9% year-on-year in June, according to preliminary official data released on Wednesday.
The producer price data trails a consumer inflation report which showed that British CPI rose to an 18-month high of 3.8% in July. Money markets are pricing in around a 40% chance of a BoE rate cut before the end of the year.
Against the euro, the balance of risks for sterling is tilted to the upside with “the hawkish repricing in Bank of England rate expectations still underpinning decent GBP short-term momentum,” Francesco Pesole, an FX strategist at ING said in a note.
“In GBP/USD, we still think a structural break above 1.35 is a matter of when rather than if,” the note said.
On Tuesday, sterling was a tad higher against the euro at 86.22 pence to the common currency.
(Reporting by Jaspreet KalraEditing by Bernadette Baum)
