LONDON: Sterling held steady against the euro and the dollar on Tuesday, with investors wary of taking fresh positions before Bank of England and European Central Bank policy meetings on Thursday.
Analysts said sterling will move in a range of 79.5-81 pence against the euro before interest rate decisions at the meetings. While the BOE is expected to resume its asset purchase programme, the ECB is likely to cut rates.
The decisions may give sterling a boost, especially against the euro as many see any BOE decision to shore up the economy as pre-emptive.
The euro was flat against the pound at 80.14 pence, close to support at 80 pence and not far from its recent low of 79.85 struck late last week. Traders said some long-term investors sold the euro against sterling earlier in the session.
Against the dollar, the pound was flat at $1.5698 with dealers citing option expiries at $1.5700 which will sway trade during the day.
"It (PMI) is a lot better (in UK) than they are in Europe and it will be positive to sterling against the euro, but I don't think it's a clear cut against the dollar," said Michael Hewson, markets analyst at CMC Markets.
He expected the pound to trade between 79.8-80.5 pence against the euro, and $1.5760-1.5620 against the dollar.
Investors are also waiting for UK's construction purchasing managers' index and consumer credit data from the BOE at 0830 GMT. A Reuters poll showed the PMI will fall to 53 in June from 54.4 last month, though still above the 50 level that separates contraction from growth.
"The housing market weakness and the planned cuts in public infrastructure spending suggest little support for construction in the near term," Barclays said in a note of the expected drop in the PMI index.
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