Sterling slips ahead of UK jobs, inflation data

By Joice Alves

LONDON (Reuters) - Sterling fell against the euro and the U.S. dollar on Monday, with traders awaiting UK jobs and inflation data due later this week for clues on Bank of England (BoE) monetary policy plans.

Adding to pressure on sterling, hopes for further progress in talks between British and European Union negotiators on post-Brexit trade rules for Northern Ireland are fading.

The British prime minister's spokesperson said on Monday significant differences remained between Britain and the EU.

Sterling was down 0.3% against the dollar at $1.2200 at 1230 GMT after rising to its highest against the greenback since mid-December.

Against the euro, the pound fell 0.23% to 88.73 pence after touching on Friday its lowest level against the single currency since late September.

Employment data will be released on Tuesday and inflation numbers on Wednesday, which will provide evidence of how Britain's economy fared towards the end of last year.

ING Head of FX Strategy Chris Turner said rate hike bets for this year have softened since last week and data will be key before firming those expectations.

"It is not clear that this week's data will add to those softer expectations - wages and inflation could remain high - but we do see those BoE tightening expectations coming under pressure over coming months," he said.

A tenth consecutive BoE rate hike is expected at the central bank's Feb. 2 meeting, with money markets seeing a 65% chance of a 50 basis point (bps) hike and a 35% chance of a 25 bps increase. [IRPR]

In the meantime, Prime Minister Rishi Sunak's government is coming under growing pressure to try to resolve pay disputes with hundreds of thousands of workers following months of strikes that have caused widespread disruption.

Britain is seen facing further disruption as teachers in England and Wales are set to announce strike action, joining nurses, rail workers and others in staging industrial action.

The pound has risen sharply against the dollar since hitting a record low of $1.0327 in September. It has rallied more than 7% against the greenback in three months.

Against the euro, however, it has weakened 2.5% in three months.

(Reporting by Joice Alves; Editing by Mark Potter)