GLOBAL MARKT OUTLOOK: After rising on the strength of better-than-expected British economic growth, the Sterling fell on Wednesday as traders awaited consumer confidence data and concentrated on Britain's political woes.
Sterling was down 0.24% at USD 1.2083 at 1151 GMT, reversing Tuesday's 0.6% gain versus the dollar. It held steady at 87.93 against the euro after increasing 1% on Tuesday. 

Statistics released on Tuesday revealed an unexpected uptick in Britain's preliminary "flash" S&P Global/CIPS UK Composite Purchasing Managers' Index, fueling predictions the Bank of England (BoE) would maintain higher interest rates for longer.

The PMI data followed better-than-anticipated retail sales, but going forward, markets will be paying attention to the impasse over the post-Brexit trade agreement for Northern Ireland and the GFK consumer confidence data that will be released later this week, according to Jeremy Stretch, head of G10 FX strategy at CIBC. Stretch predicted a drop to towards USD  1.2005/15, noting that "the latter is near lows, underscoring a degree of consumer hesitation is expected to mix with ongoing UK political headaches linked to the Northern Ireland protocol."

The so-called Northern Ireland protocol, which outlines the requirements for trade with the province after Brexit in order to prevent the establishment of a hard border with EU member Ireland and to help safeguard the bloc's single market, is the subject of a dispute between Britain and the European Union that is getting closer to resolution. 

Money markets are currently pricing a 99% chance of the BoE hiking rates by another quarter of a percentage point on March 23 in order to support sterling against a stronger dollar.

In contrast to many analysts' earlier predictions that March's rate increase would be the last in the BoE's current tightening cycle, the UK rates are now considered as most likely to peak at 4.75% later this year.

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