LONDON: Sterling rose slightly against the dollar on Thursday, halting a recent sell-off, with investors awaiting the rate decisions from the Bank of England and the European Central Bank later in the day.
The British pound had come under pressure on Wednesday, falling to its lowest in six weeks on speculation that the BoE could ease policy as early as Thursday.
But the central bank is widely expected to keep its quantitative easing programme unchanged and the bank rate steady and traders said this could give sterling a boost.
Sterling made some gains against the dollar, rising 0.1 percent to $1.6040 ahead of the BoE decision at 1200 GMT, after reported buying by middle east investors boosted the pound.
The currency hit a near six-week low of $1.5992 on Wednesday, as some investors bet the BoE could ease policy in the near term.
"There was a bounce off around the $1.60 level in the last couple of days... but the last couple of times it has (moved) above the $1.62 level it hasn't stayed there very long so we will wait to see if that can be maintained," said Christopher Beauchamps, market analyst at IG Markets, adding a potential rate cut or from the ECB could filter through to make the pound more attractive.
The euro held flat against the British pound at 81.53 pence after four straight days of gains, and although most investors expect no rate cut at the ECB's meeting they will be looking for indications of a future easing at a press conference by President Mario Draghi.
"There will be some members of the governing council who would want to reduce rates but I would be surprised if there was a consensus or a majority on that. So the ECB will probably choose to not change policy," Michael Derks, chief strategist at FX Pro, said.
Economists at Citi told clients that recent data does not justify immediate action from either central bank.
"That said, they (the central banks) do highlight that the ECB and the BoE may have to switch gears fairly soon (as soon as February even) and add more accommodation," the note said.
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