Sterling hits two-month high ahead of Bailey's remarks

Sterling rose in European trade on Monday against a basket of major rivals, extending gains for the second straight session against the dollar and scaling a two-month high amid strong risk appetite.

The gains come ahead of Bank of England's Governor Andrew Bailey's speech later today, which could shed light on the future of interest rates and inflation.

GBP/USD

GBP/USD rose 0.4% to 1.2510, the highest since September 13, with a session-low at 1.2446, after closing up 0.4% on Friday, the first profit in three days as the dollar tumbled against most rivals. 

The pound rose 1.9% last week against the dollar, the second weekly profit in three weeks following a spate of weak US data.

Bailey

Later today, Bank of England Governor Andrew Bailey will speak on London on the future of monetary policy and interest rates. 

Bailey recently said that it's too early to talk about interest rate cuts, and that monetary policies should remain right for an extended duration.

He said the BOE expects inflation to take two years before reaching the 2% target. 

The Dollar

The dollar index fell 0.3% on Monday, sharpening losses for another session and plumbing a 2-/15 month trough at 103.47 against a basket of major rivals.

The dollar continues to suffer from a spate of weak US data released last week, especially consumer and producer prices data, which effectively ruled out another interest rate hike next month. 

Investors now pretty much expect the Federal Reserve to wrap up the current cycle of policy tightening and focus on the data of the first interest rate cut in 2024.