Sterling Declines Against Euro Before Key Economic Events

By Stefano Rebaudo

(Reuters) - Sterling edged down versus the euro and was unchanged against the dollar as investors awaited economic data on both sides of the Atlantic and a speech from Bank of England Governor Andrew Bailey later in the day.

BoE policymaker Catherine Mann said that UK price rises in the year ahead would be consistent with the bank's target, the FT reported. 

Mann, previously the most hawkish member of the Monetary Policy Committee, joined Swati Dhingra last week in seeking a bigger rate reduction to 4.25%. The bank instead cut its rate by a quarter of a percentage point to 4.5%. 

Markets are gearing up for U.S. inflation data on Wednesday and British gross domestic product (GDP) figures due on Thursday, which could affect expectations for the BoE's rate path.

"We expect disappointing monthly GDP data to continue in December, with services output flatlining and manufacturing and construction activity both declining," said Sanjay Raja, senior economist at Deutsche Bank.

Sterling was down 0.15% at 83.40 pence per euro. It hit 82.88 pence a week ago, its lowest level since January 8.

The pound recently rose against the single currency as economists expect the euro area to have more to lose than the UK in case of U.S. tariffs.

"This uptrend (versus the euro) is supported by heightened European political risks and UK-German short-term yield spreads, though both have stabilised," said George Vessey, lead forex and macro strategist at Convera.

Sterling was roughly unchanged at $1.2364 against the dollar.

"The combination of sticky carry advantage and tariff resilience implies an improved near-term outlook for the pound versus the euro," said Barclays strategists led by Themistoklis Fiotakis in a research note.

"The longer-term directional path is also constructive thanks to supply-side reforms, including a closer relationship with the European Union, but also demand-supportive fiscal stimulus from April," they added.

British Prime Minister Keir Starmer told European Union leaders at a dinner on Monday that he wanted to work together to expand the continent's defences. 

At the end of January, Starmer met business leaders, seeking to hammer home the message that ministers had been told to refocus their attention on economic growth with every major decision. 

(Reporting by Stefano Rebaudo; editing by Hugh Lawson)