Sterling dips against dollar

Monthly inflation at zero, rather than a forecast -0.1 percent, was not enough to boost sterling as the Federal Reserve began a meeting that is widely expected to raise US interest rates for the first time in almost a decade. The pound wavered after the November data showed British consumer prices were unchanged on the month and up 0.1 percent on an annual basis. Sterling rose as high as $1.5182 in early afternoon London trading.
But after more data showed underlying US inflation pressures rose in November, which could give the Fed more reason to raise rates throughout 2016, sterling dipped to $1.5045 as the dollar rallied, leaving it down 0.6 percent on the day and at its weakest in five days. Barclays currency strategist Hamish Pepper said the US data might have helped the dollar a bit, but it was important not to read much too much into market moves before the Fed decision, due on Wednesday.
"These markets have been a bit hard to understand in the last few days," he said. "Liquidity is starting to thin, as is common ahead of these major events, and sterling is just getting caught up in all of that." A speech by Bank of England Deputy Governor Minouche Shafik on Monday underlined that the BoE will be in no hurry to raise rates next year, barring a big surprise on data in the first quarter.
Thereafter, many analysts say policymakers' hands may be tied by downward pressure on the pound as a debate begins on whether Britain should leave the European Union. "The problem for (the Bank's) hawks is that inflation needs to show more life and, before late Q1, hope for that looks slim," said Todd Elmer, a strategist with Citi. "The pound is sidelined for now."
Dealers said the market looked to be positioned all but entirely neutrally going into the Fed decision. Most are now betting on a "dovish hike" - a rise in interest rates followed by signs from Fed chief Janet Yellen that the bank may stay on hold for some time before moving again, if at all. Against the euro, sterling was up 0.1 percent at 72.56 pence. The pound had fallen to a seven-week low on Monday on signs the government may not get its way in talks with European partners before next year's vote on leaving the EU.