Sterling staged a solid recovery against the dollar and euro on Tuesday, with some players pointing to hopes for a brighter set of labour market data along with minutes from the Bank of England's latest meeting. Sterling has suffered as the markets push back their forecasts for when the BoE will raise rates towards 2016. Only a few months ago, many in the market had been expecting a rate hike in early 2015.
Still, analysts and traders expect at least one or two of the bank's nine monetary policy committee members to have voted to raise borrowing costs this month. The minutes and employment data are due out at 0930 GMT on Wednesday. Solid readings on wages and employment would also underline Britain's strength compared with its European peers.
Consensus expectations are for a 1.9 percent rise in wages, further outstripping inflation, which fell to 0.5 percent in December. Some said that had helped sterling fend off any push below $1.50. "Cable delivered an impressive rebound and tested the $1.52 barrier," analysts from Belgium's KBC said in a note. "It is up to the data and the minutes to bring some clarity."
That said, the decisive event for the pound is still more likely to be the fallout from Thursday's decision by the European Central Bank on whether to embark for the first time on outright money-printing to revive a moribund euro zone economy. A strong message on stimulus from the ECB would be expected to drive the euro lower against the dollar and take the pound with it. "Whether sterling falls below $1.50 will essentially depend on what the ECB does. I don't think the (BoE) minutes will take it there," said Graham Davidson, a spot currency trader with NAB in London.
"One of those (BoE) votes may have changed and that would be a slight negative for the pound but it may be the tone of the discussion that is most important." By 1626 GMT, the pound traded 0.8 percent higher at 76.16 pence per euro. Against the dollar, it gained 0.5 percent to $1.5183.