LONDON: The pound rose on Monday, heading back towards multi-month highs against both the euro and the dollar, a day before important wage data that will guide the Bank of England’s future rate policy plans.

Sterling rose 0.46% against the dollar to $1.2505. It hit a one-year high of $1.2679 last week, before dropping sharply as the dollar rebounded across the board, with signs of slowing global growth pushing investors to the safety of the U.S. currency.

Versus the euro, the pound was also stronger, with one euro worth 86.97 pence, 0.2% lower on the day.

The pound reached 86.62 pence per euro last week, its strongest versus the euro since 2023.

Tuesday’s employment data is the main event for the British currency this week, as the Bank of England is worried that recent strong headline pay growth could turn into a long-lasting problem for the economy, due to its effect on inflation.

The BOE last Thursday raised interest rates by 25 basis points as expected, and also forecast much stronger wage growth and lower unemployment than three months ago.

British policy makers said then that future rate increases would depend on upcoming data, though markets have fully priced in one more 25-bp increase and show a reasonable chance of a second by the autumn.

“Although the bar is now too high for the (rate-setting Monetary Policy Committee) to take a more hawkish position than the market, high and sticky domestic inflation along with strong wage growth are transforming the BoE into a less-dovish central bank versus G10 peers,” Barclays analysts said in a note.

“This leaves sterling range-bound around current levels versus the euro, whose macro exposures and monetary policy outlook are somewhat similar, and on the front foot versus the dollar - at least in so far as a broader deceleration in growth is not in store.”

As well as April’s employment data, they said this week they were watching speeches by policy makers Huw Pill and Jonathan Haskel.