LONDON: Sterling tiptoed up on Tuesday as the dollar softened ahead of US data that could show inflation beginning to peak, paving the way for less aggressive interest rate hikes by the Federal Reserve.

The dollar’s hesitancy gave some respite to the pound, which has been battered in recent months by a drumbeat of bad news about Britain’s faltering economy, persistent inflation and mounting energy crisis.

Data on Monday showed Britain’s economy growing even less than expected in July, as the sharp increase in energy prices curbed demand.

New Prime Minister Liz Truss has sought to get a grip on the problem immediately by announcing a cap on domestic energy tariffs, albeit at a cost of adding 100 billion pounds ($117.21 billion) or more to Britain’s already stretched public finances.

British employment data due later on Tuesday could be overshadowed in the impact on the pound against the dollar of US inflation figures due at 1230 GMT, which will frame the Fed’s policy meeting next week.

Sterling falls to weakest since early 2021 against euro

The pound rose 0.3% on Tuesday morning to reach $1.1725, above its recent nadir of $1.14 hit last week.

Sterling meanwhile held steady at 86.6 pence per euro, having plunged briefly to its lowest level against the bloc’s currency since 2021 on Monday as the euro benefited from hawkish European Central Bank commentary over the weekend.