By Lucy Raitano
LONDON - Sterling edged up against a weaker dollar on Monday, hovering near a three-month high, even as Britain's murky economic outlook weighed on traders' minds.
At 1030 GMT, the pound was up 0.12% at $1.2103 - not far off a three-month high of $1.2153 touched on Nov. 24. But sterling fell 0.6% versus the euro at 86.58 pence.
A survey released on Monday showed Britain's property market activity stalling in October and house price growth slowing to its lowest quarterly level since February 2020, as the fallout from former prime minister Liz Truss's "mini-budget" and a cost-of-living crisis continued to be felt.
A UK CBI retail survey is due to be published on Monday, and will show how the UK consumer is dealing with soaring inflation and a pay squeeze.
Analysts said sterling's direction this week was likely to be driven by its peers given the political backdrop is more settled and the data calendar is quiet.
Fears of a lengthy UK recession were seen weighing on sentiment.
Last week's flash purchasing manager index (PMI) data showed British economic activity staying near 21-month lows, though the figures were slightly better than economists had expected.
Market players pondering the Bank of England's (BoE) next move will be listening carefully to several BoE members due to speak this week, including BoE governor Andrew Bailey on Tuesday and chief economist Huw Pill on Wednesday.
The Monetary Policy Committee, the BoE's rate-setting body, is expected to increase rates by 50 basis points on Dec. 15, taking the base rate to 3.50%, a Reuters poll of economists found.
The central bank has been hiking rates since late 2021 to try to bring down soaring inflation without damaging the economy too much in the process.
"The BoE’s forecasts imply that the bulk of UK inflation will dissipate and that minimal further tightening is required," said Mizuho senior economist Colin Asher, writing in a note that the BoE’s forecasts suggest the upcoming recession will do much of the necessary work in battling inflation.
(Reporting by Lucy Raitano; editing by Dhara Ranasinghe and Barbara Lewis)