Sterling edges higher ahead of BoE decision

Sterling rose 0.29 per cent against the dollar on Monday to 1.3305, supported by broad dollar weakness and investor focus on the Bank of England’s upcoming policy decision due on Thursday.

With UK markets subdued by a bank holiday, traders are bracing for a widely expected 25 basis point rate cut to 4.25 per cent. However, attention is shifting to the BoE’s forward guidance, as some analysts argue the central bank should quicken its pace of easing amid global growth risks from US trade policies.

“We anticipate the BoE will downgrade its GDP forecasts due to the trade war,” said Samara Hammoud, currency strategist at CBA, who warned the bank could drop its reference to a “gradual” cutting cycle—a move that may weaken the pound further.

Markets are currently pricing in at least two more rate cuts this year beyond Thursday’s move, with a strong chance of a third. Sterling slipped slightly against the euro to 85.26 pence.

The US Federal Reserve, also meeting this week, is expected to hold rates steady on Wednesday.

Attribution: Reuters

Subediting: M. S. Salama