The U.S. dollar wobbled near its recent two-month low, eyeing U.S. core PCE prices due this week for hints on the Fed’s next steps

The dollar kicked off the last week of November on the back foot while sterling held near a more than two-month high on an easing economic gloom in the U.K., as traders eyed fresh economic signals in the week ahead to determine the future course of policy rates.

Sterling was 0.06 per cent down at $1.2598, but stayed near Friday’s over two-month peak of $1.2615, on data last week showing that British firms unexpectedly reported a marginal return to growth in November following three months of contraction.

That suggests the resilience of the U.K. economy despite the very aggressive monetary policy tightening from the BoE, said Carol Kong, a currency strategist at Commonwealth Bank of Australia, or CBA. But we still expect the U.K. economy to weaken and experience a short-lived recession.

The pound was on track for a nearly 3.7 per cent gain for the month, its biggest monthly gain in a year, aided by a declining U.S. dollar.

The Australian dollar likewise sat near a roughly three-month high and last bought $0.6578, ahead of domestic inflation data on Wednesday.

In the wider currency market, the U.S. dollar wobbled near its recent two-month low against a basket of six rivals, with traders, returning from the Thanksgiving lull late last week, eyeing U.S. core PCE (Personal Consumption Expenditures) prices due this week for hints on the Fed’s next steps.

The dollar index, which was last 0.08 per cent up at 103.51, was headed for a monthly loss of 3 per cent, its worst performance in a year.

We anticipate that the turnaround in the U.S. dollar will play out over a longer period, said Jane Foley, senior FX strategist at Rabobank.

Insofar as CPI (Consumer Price Index) inflation rates across much of the G10 are still above central bank targets, there is a strong incentive for policymakers to support the ‘higher for longer’ theme since higher market rates will help in the battle against inflation, Foley added.

Investors, nevertheless, are looking through this policy and appear increasingly pre-occupied about betting on the timing and pace of rate cuts next year, Foley added.

The weakening greenback provided some respite for the Japanese yen, which stood on the stronger side of 150 per dollar and last sat at 149.52 per dollar.

The euro slid 0.03 per cent to $1.0930, but did not stray far from an over three-month high of $1.09655 reached last week.

The New Zealand dollar eased 0.1 per cent to $0.6076, but was likewise hovering near Friday’s over three-month high of $0.6096.