Sterling slipped below $1.22 on Monday as worries about the fallout from Britain's vote to leave the European Union outweighed reports that Mark Carney will serve a full term as governor of the Bank of England.
After falling more than 6 percent against the dollar since the start of October, the pound was on track for its worst month since June, when it plunged following the June 23 vote for Brexit.
The Financial Times and the BBC reported over the weekend that Carney, who became governor in 2013, was ready to serve a full eight-year term instead of five. Politicians critical of his stance on the EU referendum had called for him to step down in 2018.
Other newspapers had said over the weekend that Carney was more likely to announce that he would leave in 2018.
The pound did inch up to $1.2212 on the news in Asian trade late on Sunday, but by 0850 GMT it was down 0.2 percent on the day at $1.2167.
Societe Generale macro strategist Kit Juckes said the reports had provided a catalyst for a modest "short squeeze" - in which traders who had been short sterling bought it back. But even if the reports on Carney staying were confirmed, Juckes said, that would not fundamentally change the outlook.
"Him going would be another negative, but him staying means we sit and get on with it," Juckes said. "It stabilised sentiment and stopped us where we are. If we get surprises from the PMI numbers this week, I think that's probably going to drive us more than anything else."
Purchasing managers' index (PMI) surveys for the manufacturing, construction and services sectors are due on Tuesday, Wednesday and Thursday respectively.
Investors are also focused on Thursday's BoE policy decision and quarterly inflation report, which will be accompanied by a news conference.
Sterling's weakness, a rise in inflation expectations and upbeat growth data have prompted most to rule out a cut this week. Around three quarters of the 60 economists polled by Reuters in the latest poll expect rates to stay at 0.25 percent for the rest of the year.
"The BoE is more likely to downplay the firmer growth in the near term and continue to place more emphasis on their weaker medium-term outlook following the Brexit vote," said Bank of Tokyo-Mitsubishi UFJ currency analyst Lee Hardman.
"The BoE would have to shift to a more neutral stance by dropping rate cut signals to offer more support for the pound."
Against the euro, sterling climbed 0.2 percent to 89.95 pence, having recorded its worst week in four against the single currency.
Data on Friday showed speculators cut their short positions on the pound for the fourth straight week to 83,962 contracts - the smallest since late September but still leaving the market very short sterling.
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