The pound edged up against the euro after Bank of England (BoE) policymakers, including Chief Economist Huw Pill, reiterated policy will need to remain restrictive for some time.
Earlier this week, Pill had said market pricing pointing towards a first interest rate cut in August 2024 "doesn't seem totally unreasonable".
However, BoE Governor Andrew Bailey reiterated that monetary policy would need to remain restrictive for an extended period.
"It's really too early to be talking about cutting rates," Bailey said.
Sterling will likely weaken towards the levels seen in October against the euro and move back towards $1.2220 against the dollar as UK GDP data on Friday could show consumers remain reticent to spend amid a moderating labour market.
Markets are currently pricing in about 10 basis points of BoE policy easing as early as May, and more rate cuts over the summer, according to LSEG data.
Last week, the BoE held its benchmark rate at 5.25% and said it was not thinking about cutting it as it continued to bear down on inflation which stood at 6.7% in September, lower than a peak of 11.1% in October 2022 but still more than three times its 2% target.
A survey showed that Britain saw some of the most widespread falls in house prices since 2009 last month, but the declines were at a slightly slower pace than in the previous two months and surveyors are less downbeat about the year ahead.
