LONDON, May 9 Sterling eased against the U.S. dollar on Tuesday but stayed close to the previous day39;s oneyear high, ahead of the Bank of England BoE policy decision later this week.

At 0904 GMT, the pound was down 0.3 against the dollar at1.26145 , while it ticked 0.17 higher versus the euro to 87.06 pence .

Sterling remains close to a more than oneyear high hit on Monday, when it touched 1.26680 the strongest level against the dollar since April 26 2022.

Strongerthanexpected economic data in the UK, which has so far dodged a deep recession, is one factor behind the pound39;s robust performance, as well as a weaker dollar, which has been dragged down by slower U.S. inflation and by growing expectations that the Federal Reserve is nearing the end of its rate hiking cycle.

The BoE has raised interest rates 11 times since December 2021 as it battles to bring down doubledigit inflation.

For Simon Harvey, head of FX analysis at Monex Europe, a key factor to watch will be how the BoE manages expectations.

Given the BoE has been consistent in pushing back on market expectations, should the market implied inflation forecasts not show inflation substantially falling below the 2 target over the mediumterm, sterling is likely to rally, said Harvey.

Traders are predicting a 98 chance of a 25 bps hike from the BoE this week .

The market is also awaiting key U.S. inflation figures on Wednesday which will provide more direction on the world39;s largest economy39;s battle…