© Reuters. FILE PHOTO: A person walks past the Bank of England in the City of London financial district, in London, Britain, June 11, 2021. REUTERS/Henry Nicholls

LONDON – Sterling touched two-week lows against the dollar on Tuesday, with the greenback buoyed by more signs that the U.S. Federal Reserve would start reining in its bond-buying support in the coming months.

But the pound held near 18-month highs against the euro, which is unlikely to get any policy support from the European Central Bank (ECB) in the near-term.

Sterling has performed well in recent weeks as a fall in COVID-19 cases has allowed the British government to lift most social-distancing rules, while the Bank of England (BoE) last week flagged how it might gradually rein in stimulus.

However, Monday’s comments by regional Federal Reserve presidents, Rafael Bostic of the Atlanta Fed and Eric Rosengren from Boston, sent the dollar to four-month highs against a currency basket and spurred bets that the U.S. central bank could make a move on tapering by year-end or even sooner.

The policymakers spoke after data showed U.S. job openings shot to record highs, on the heels of last Friday’s buoyant employment report.

By 0800 GMT, the currency was at $1.38620, up 0.12% on the day after earlier hitting $1.38370, the lowest since July 27.

With no significant UK data releases, “sterling will be driven by dollar moves and can fall further if Loretta Mester strikes a hawkish tone this morning,” analysts at Commonwealth Bank of Australia wrote in a note, a reference to Cleveland Fed president who is due to speak later in the day.

British consumer spending rose strongly in July, data from payment card provider Barclaycard showed, up 11.6% on pre-pandemic levels.

The pound also firmed 0.12% against the euro at 84.365 pence, just off 18-month highs of 84.610 pence.

It has strengthened 0.8% in August so far against the euro, following on from three straight months of gains. The euro is down 1.4% against the dollar and 1.8% against the pound since July 8, when the ECB unveiled a strategic review committing to boosting inflation.

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