LONDON: Sterling hovered near a six-month low against the dollar on Monday as investors continued to bet on lower British interest rates and added to their short positions on the currency.

As major central banks around the world including the US Federal Reserve shift towards monetary policy easing, investors are betting that the Bank of England will also follow suit.

Last week it fuelled investors' hopes of a 25 basis point cut over the next 12 months, hurting the pound. Money markets are pricing in a 50% chance of one rate hike until the end of December.

Uncertainty over Britain's departure from the European Union, as well as over who will become the new prime minister and lead the country out of the bloc, added to sterling's weakness.

The pound was 0.2% weaker at $1.2507, not far from the $1.2481 low reached on Friday. Against the euro, sterling was broadly flat at 89.660 pence, still below the key psychological level of 90.

Latest data from the Commodity Futures Trading Commission reflected the pessimism over the British currency's outlook, with speculators extending their short positions in the pound to $4.68 billion, the highest level since early February.

"What's happening in the dollar will drive cable (sterling-dollar) for now," said Thu Lan Nguyen, an analyst at Commerzbank. "Brexit as a driver will become more relevant as Oct. 31 deadline approaches."

Traders will be watching gross domestic product data on Wednesday, though its influence on the pound could be negligible given that the BoE focuses on more forward-looking data, said Nguyen.

A Reuters poll of economists forecasts the British economy will have grown 0.1% in the three months to end-May, down from 0.3% in the three months to end-April.

"Activity data remains sluggish and we continue to think that 2Q19 UK GDP could be flat quarter-on-quarter," ING economists said in a note.