* 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 Ritvik Carvalho
LONDON, May 10 Sterling hit a three-week high
versus the euro and climbed towards $1.30 on Wednesday as
traders awaited this week's Bank of England inflation report and
After one BoE policymaker voted for a rate rise in March,
investors will be watching the BoE's "Super Thursday" for any
signs of change in the Bank's stance of keeping UK interest
rates at record lows.
Inflation has overshot the Bank's 2-percent target, but some
say its surge could be limited by sterling's bounce after
Theresa May's announcement of a June general election.
The pound rose as much as 0.4 percent to $1.2988, still
stuck below the $1.30 level, which analysts have said is a key
"psychological" level for the currency.
It rose 0.3 percent to hit a three-week high of 83.83 pence
"The focus now is really on the Bank of England, and maybe
that could be an explanation (for sterling strength)," said
Richard Falkenhall, currency strategist with SEB, noting
policymaker Kristin Forbes' vote for a rate hike in March and
the possibility that other members of the Bank's rate-setting
committee could follow suit.
"It could also be as simple as there is right now a silent
period, so to speak, when it comes to the Brexit negotiations
because of the UK election."
British Prime Minister Theresa May pledged to cap household
energy prices if she is re-elected on June 8, a
promise strategists at MUFG said could have positive
implications for the pound.
"Given the drop in crude oil prices and the appreciation of
the pound since the turn of the year, the value of crude oil in
pounds is dropping sharply, this means the sterling devaluation
lift to energy inflation is reversing as quickly now as it
jumped last year post-referendum," they wrote.
"Now with this announcement of the energy price cap, the
government is looking at avoiding a repeat of the price surge in
2011-12 that hit the UK economy hard."
Traders have dialled back their expectations of sterling
weakness after May called for the snap election. Data released
on Friday showed speculators trimmed their short positions on
the pound for a third week in a row, to a two-month low of
(Reporting by Ritvik Carvalho; Editing by Andrew Heavens)