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Sterling near one-week low vs dollar, eyes on BoE's Bailey

By 0742 GMT, the pound was flat at $1.2183 GBP=D3, near the lowest level in almost one week. Against the euro it edged up 0.2% at 86.20 pence EURGBP=D3 from a near two-week low. The BoE faces the difficult task of taming price pressures, which surged to a 40-year high of 9.1% in May, without further damaging the economy through policy tightening. The bank has said it would act "forcefully" if needed to combat inflation but the poor macro outlook has meant a more gradual pace so far for rate hikes, which has widened a policy differential compared to the United States. Money markets fully price in a 25 basis point BoE rate hike for August and give a 78% chance of a 50 bps move. BOEWATCH Political risk is also on the rise after Scottish First Minister Nicola Sturgeon on Tuesday proposed another independence referendum for October 2023. Johnson and his Conservative Party, which is in opposition in Scotland, strongly oppose a referendum, saying the issue was settled in 2014 when Scots voted against independence by 55% to 45%. The pound has fallen more than 9% since the start of the year against a rising dollar and is set for its biggest six-month drop since November 2016. (Reporting by Danilo Masoni; Editing by Edmund Blair) ((Danilo.Masoni@TR.com; +39-02-66129734; Reuters Messaging: danilo.masoni.thomsonreuters.com@reuters.net; On Twitter https://twitter.com/damasoni)) The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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