LONDON (Reuters) - The pound rose against the dollar on Monday and was steady on the euro at the start of a busy week for markets in which the main event in Britain is Wednesday's budget.
Sterling was last up 0.2% against the dollar at $1.2681 as a broad positive tone across markets caused a weakening in the greenback. The pound was little changed versus the European common currency at 85.59 pence per euro.
British finance minister Jeremy Hunt will announce his budget on Wednesday. While such events do not always have a major impact on currencies, the dramatic response to autumn's 2022 economic policy announcement, which caused a sharp sell-off in British government bonds and sent the pound tumbling, means investors will be watching.
Hunt is expected to use the budget to try to boost Prime Minister Rishi Sunak's flagging fortunes by cutting taxes, but without reviving bond investors' worries about the public finances. Over the weekend Hunt played down talk of large tax cuts.
"If the government has less fiscal room to manoeuvre then, at the margin, that means that the amount of stimulus that will come could be on the more disappointing side, and so could give the BoE a bit more leeway to cut rates sooner," Lee Hardman, senior currency analyst at MUFG, said.
"They would need the data to behave though."
A major factor for currency markets at present is changing expectations of when different central banks will be confident that inflation is under control and start cutting interest rates.
The Bank of England is expected to lag the Federal Reserve and the European Central Bank when it comes to rate cuts, something that has supported the pound in recent months.