Market News

(Reuters) -Sterling gained against the dollar and the euro on Monday as investors braced for a week of pivotal central bank decisions in which the U.S. Federal Reserve is expected to cut interest rates and the Bank of England to hold policy steady.

Sterling rose to its highest level against the dollar since early July before paring gains. It was last at $1.3583. Against the euro, the pound was up 0.2% to 86.33 pence but remained within its recent range.

Investors are focusing on this week's key rate decisions in the United States, Japan, Britain, Canada and Norway, with the Federal Reserve's decision on Wednesday taking centre stage.

While the Fed is widely expected to cut rates by 25 basis points, the Bank of England is likely to keep its main interest rate on hold and announce a slow down in the pace at which it reduces its government bond holdings.

Commentary from the policy decision is unlikely to spur a meaningful reaction in sterling as attention remains on Britain's autumn budget announcement, said Nick Rees, head of macro research at Monex Europe.

Finance minister Rachel Reeves will deliver her annual budget on November 26. UK public finances remain weak and analysts say Reeves will have to raise taxes by at least 20 billion pounds ($27 billion) - and possibly double that - to remain on course to hit her own fiscal targets.

Elsewhere, the dollar was a touch weaker against a basket of peers, with Goldman Sachs analysts saying the impending Fed rate cut should lead to fresh declines.

The dollar has fallen nearly 10% so far this year against major peers.

The U.S. economy's reduced outperformance relative to the world and the lower cost of hedging U.S. dollar assets for investors in Asia are among the factors that could contribute to fresh weakness in the dollar, the Goldman Sachs analysts said in a note.

(Reporting by Jaspreet KalraEditing by Mark Potter)