LONDON, May 30 Reuters The British pound traded little changed against a faltering U.S. dollar on Monday but was still set for its first monthly gain in five as the risksensitive currency benefited from improving sentiment.

As markets have readjusted their rate hike expectations from the Federal Reserve lower, the dollar index has weakened over 3.5 from its midMay peak. This helped lift sterling after it reached its lowest level since March 2020 earlier in the month.

The rebound in GBPUSD largely reflects USD depreciation, said Vasileios Gkionakis, EMEA Head of CitiFX G10 Strategy, who remains bearish on sterling against the euro and commodity FX, citing weakening growth, depleting household savings, absence of meaningful fiscal stimulus and a likely resurfacing of Northern Ireland protocolrelated headlines.

Trade was likely to be light through Monday as U.S. stock and bond markets close for the Memorial Day public holiday, while the UK calendar is looking light this week with markets closed on Thursday and Friday for the Spring Bank Holiday and Queen39;s Platinum Jubilee.

At 0814 GMT, the pound was little changed against the dollar at 1.2628, just off Friday39;s monthly high of 1.26665.

Against the euro, sterling was down 0.2 at 85.13 pence.

Despite sterling39;s recent recovery against the dollar, data on Friday released from the Commodity Futures Trading Commission CFTC showed investors slightly added to their sterling net short position in the latest week.

The…