Sterling edges higher, key UK data flurry up ahead

LONDON, Jan 14 (Reuters) - The pound rose on Wednesday, gaining against the dollar, euro and yen, ahead of economic growth data later this week that might help shape expectations for Bank of England monetary policy in the coming months.

Sterling was ?up 0.2% at $1.3447. It has barely made any headway against the dollar so far ?in January, but has gained ground against the euro, which has lost ?0.7% so far this month.

Geopolitical tensions in Iran ?and Greenland, along ?with U.S. President Donald Trump's latest attack on the independence of the Federal Reserve have made ?investors more cautious about the dollar in ?the last week or so.

Investors have warmed to the pound so far in 2026. Weekly data from the ?U.S. regulator shows they cut ?their bearish sterling ?positions by the most in five months in the first week of January.

Speculators now hold a long dollar position - one that assumes ?the U.S. currency will rise against the pound - worth just $2.577 billion, down from $6.586 billion at the end of December, the largest such position since September 2019.

UK inflation cooled more quickly than expected towards the end of 2025, while growth remains sluggish. Markets expect just two ?rate ?cuts from the BoE this year, something analysts at Morgan Stanley say is overly optimistic and weak readings of growth and ?price pressures could prompt a drop in the pound.

"Soft UK employment and CPI for December would be key catalysts for markets to reprice for a February BoE rate cut, compared to almost nothing priced currently," they said in a note.

Consumer price data lands next week, along with monthly jobs figures, ?while GDP data is due on Thursday. Economists polled by Reuters expect the UK economy to have contracted by 0.2% in the three months to November, leaving the annual ?rate of growth at 1.1%.

(Reporting by Amanda Cooper; Editing by Jane Merriman)