Sterling Dips vs Euro, Rises Against Dollar, Ukraine in Focus

Sterling Changes Amid Ukraine Peace Efforts and Dollar Movements

By Stefano Rebaudo

(Reuters) - The pound edged down against the euro and rose versus the U.S. dollar on Monday after European leaders agreed on Sunday to draw up a Ukraine peace plan to present to the United States.

The single currency is expected to benefit the most from a peace deal in Ukraine, while Germany is mulling a significant increase in fiscal spending.

British Prime Minister Keir Starmer announced on Sunday a new 1.6 billion pound ($2 billion) deal that would allow Ukraine to purchase 5,000 air-defence missiles using export finance.

The single currency was up 0.10% at 82.53 pence per euro, after falling to 82.40 pence last week , its lowest level since December 19.

The euro has also been under broader pressure after U.S. President Donald Trump threatened last week to apply a 25% tariff to European Union exports of cars and other goods.

Whatever happens on that front, economists expect the U.S. protectionist measures to weigh on all European currencies and a lot less on the pound.

The dollar dropped on Monday as investors focused on a possible peace deal and more fiscal spending in the euro area.

Sterling recorded its first monthly rise since September against the greenback on Friday, driven by the prospect of UK rates taking longer to fall than those elsewhere.

Sterling was up 0.3% on the day at $1.2614.

Wage pressures in Britain have raised the risk of inflation holding above the Bank of England's target, the bank's Deputy Governor Dave Ramsden said on Friday, though he added that interest rate cuts did not necessarily need to be slow.

"We remain of the view that the pound rally versus dollar won't prove sustainable beyond the very near term as we expect the UK budget event at the end of March to trigger fresh pressure on the pound also by potentially unnerving the fragile gilt market," said Francesco Pesole, forex strategist at ING.

Analysts said the UK data calendar is quiet this week. The major domestic event is probably the Treasury Committee questioning of Bank of England Governor Andrew Bailey and other monetary policy committee members on Wednesday.

(Reporting by Stefano Rebaudo; Editing by Bernadette Baum)