Sterling had a reactionary day on Tuesday, not helped by sentiment that the economy is recovering at a slower pace than anticipated.

The pound fell versus a stronger euro to dip below 1.10 in afternoon trading. Against the dollar, sterling made marginal gains.

Yesterday was uneventful on the news and data front in the UK. As ever, markets wait for statements providing some Brexit clarity amid a lacklustre week for economic releases.

In early trading today, sterling has clawed back some ground versus the majors.

GBPUSD opened at 1.2528, closing at 1.2552

GBPEUR opened at 1.1037 and hit a low of 1.0978, before closing at 1.1011

The US dollar softened on Tuesday as inflation expectations increased slightly and the euro rose in value.

Data showed that consumer prices rebounded by the largest margin in nearly eight years in June, according to a Labor Department report. The increase, which halted three straight months of declines, was driven by a 12.3% jump in fuel prices. Although not regarded as a major indicator, it does heighten expectations that inflation is set to rise following the massive stimulus measures implemented during the crisis.

The dollar index was down 0.29% at 96.271 and the greenback lost 0.44% to the euro during the day.

The euro broke the 1.14 level versus the dollar yesterday on hopes EU leaders may agree on stimulus and more fiscal integration to protect the economy from the pandemic. The single currency also dipped above the 1.10 level against the pound.

There are increasing hopes that the EU could agree on a rescue financing package at its summit later this week. Adding to the positive sentiment, with the rigorous lockdown measures imposed by France, Germany and Italy, the virus appears to be under control.

The euro has continued its momentum versus the dollar in early trading, rising to a 4-month high.

EURUSD opened at 1.1351 and closed up at 1.1401