* Graphic: sterling and gilt yields bit.ly/2dgAXn1
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv
By Jemima Kelly and Marc Jones
LONDON, April 10 Sterling strengthened versus
the dollar and the euro on Monday, bouncing back from a
three-week low as investors eyed coming inflation data that
could revive bets on eventually tighter Bank of England policy.
The pound gained over 1.5 percent against the dollar
in March on the back of rapidly accelerating prices,
with markets moving to price in the chance of an interest rate
rise at the start of next year as one BoE rate-setter - albeit
an ongoing one - voted in favour of a hike.
But it has fallen back since the start of April, with
comments from BoE Governor Mark Carney as well as fellow
policymakers such as Gertjan Vlieghe pouring cold water on the
idea that Britain's record-low interest rates could increase any
time soon despite rising inflation.
Sterling gained 0.4 percent on Monday to $1.2419,
leaving it about half a cent above a three-week low of $1.2365
touched on Friday.
Currency market positioning data from the Commodity Futures
Trading Commission released on Friday showed a small scaling
back of 'short' positions on the pound in the week up to last
Tuesday, though they remain near the highest level on record.
"Sterling (has) found support at the 30-day moving average,
at $1.2366, for two consecutive days in line with a reduction in
net short positions against the pound," said Western Union
corporate hedging manager Harry Mills.
"We look towards tomorrow’s CPI (consumer price inflation)
release for any signs that a persistently weak pound and rising
energy prices will cause further headache for the BoE,
especially against a backdrop of slowing wage growth."
Numbers due at 0830 GMT on Tuesday are expected to show
consumer prices increased 1.9 percent in March compared with the
same month last year, a slight deceleration from February's rate
of 2 percent.
Sterling also gained against the euro on Monday, up 0.3
percent at 85.39 pence.
Wages data on Wednesday will also be closely watched, as
will any further signals of the early mood in Brexit
The other 27 European Union members have sketched out their
stance, but will lay down more formal guidelines on April 29.
"What you are looking for is another of layer of bad news,"
said ING currency strategist Viraj Patel. "There is a clear
mismatch from what the UK wants and what the EU wants, so I
think we are in for a bit of a reality check here."
(Editing by Tom Heneghan)