Sterling drifts higher but capped by weak data

"Data for the month of July confirm the slowdown in real demand and that might make the (BoE) policy announcement a more finely balanced one," said Stephen Gallo, European head of FX strategy at BMO Capital Markets. Versus the U.S. dollar, the pound edged higher at $1.2051 and was steady versus the euro at 84.13 pence.

The British pound edged higher on Wednesday thanks to a broadly consolidating dollar but gains were capped by a fresh slate of weak data highlighting the problems facing the economy. British employers are feeling the most pessimistic about hiring and investment since the depths of the coronavirus pandemic crisis in 2020, while shops and supermarkets in Britain increased prices by 4.4% in the 12 months to July, the largest rise in more than a decade.

A raft of weak economic data has put pressure on the Bank of England to soften its monetary policy tightening path. While economists in a Reuters poll expect the central bank to raise interest rates by 25 bps next week, some analysts expect a bigger 50 bps hike. "Data for the month of July confirm the slowdown in real demand and that might make the (BoE) policy announcement a more finely balanced one," said Stephen Gallo, European head of FX strategy at BMO Capital Markets.

Versus the U.S. dollar, the pound edged higher at $1.2051 and was steady versus the euro at 84.13 pence.