LONDON, June 21 Reuters Sterling rose on Monday, reemerging from an overnight fall to its lowest level versus the dollar since April after the U.S. Federal Reserve surprised the market with a hawkish tone last week.
At 1120 GMT, the pound rose 0.6 versus a weakening dollar to 1.3880, after falling to 1.3786, its lowest of since April 16.
Last week the Fed signalled it would raise interest rates and end emergency bondbuying sooner than expected.
I think what were seeing today is a minor retracement in high beta currencies across the board. The moves look tentative, however, as I dont think the dust has fully settled in FX markets postFed, said Simon Harvey, Senior FX Market Analyst at Monex Europe.
A more optimistic economic assessment from the Bank of England, which next meets on Thursday, could push sterling towards 1.40 quicker, he added.
Britains top central bank officials look set to remain divided over whether to pull the plug on their 875 billionpound 1.2 trillion government bond purchase programme, after inflation hit its highest in nearly two years.
In the meantime, investors brought forward bets that the BoE would raise interest rates sooner than they thought previously, flattening the yield curve for British government bonds and mirroring a recent move in U.S. Treasuries.
Currency markets are fully pricing in a 30 basis point hike in rates by the BoE by December 2022.
Investors are also watching a dispute between Britain and the European Union over…