Sterling remained around USD 1.20 vs the US dollar on Monday, as traders were concerned about the outlook for the British currency following recent dismal statistics ahead of a widely anticipated US interest rate hike this week. 

The pound was trading around USD 1.2005 against the US dollar, just off Friday's high of USD 1.2064, which was the highest level in nearly three weeks. The pound was unchanged against the euro, trading at 85.02 pence. "The UK's post-pandemic recovery is dragging behind the rest of the G10 countries, and inflation is expected to be stickier as a result of Brexit, confounding the BoE's policy even further," Citibank strategists wrote in a client note.

According to an industry survey released last week, Britain's businesses grew at their slowest rate in 17 months in July, and inflationary pressures lessened. The British economy is feeling the effects of inflation, which is on track to reach double digits, thanks in large part to increasing fuel prices.

Despite the fact that consumer spending and corporate activity are faltering, the Bank of England is largely expected to raise interest rates by 50 basis points at its policy meeting on August 4. According to the most recent positioning data, investors' negative bets on the pound have stabilised at around USD 4.3 billion, not far from a near two-year high of USD 6.2 billion in May.The federal reserve is largely expected to raise interest rates by 75 basis points when it closes its two-day policy meeting on Wednesday.

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