LONDON: Sterling edged lower against the dollar and euro on Wednesday, with demand muted ahead Bank of England minutes that will be scrutinised for any clues on the likelihood of further monetary easing.
Market players expect the minutes will show policymakers voted 6-3 in favour of keeping asset purchases on hold at 375 billion pounds in April, as they did the two previous months.
Analysts said that could give a marginal boost to the pound, although worries that the economy is teetering on the brink of a third recession in less than five years are likely to cap gains.
Investors will focus on UK unemployment data, also released at 0830 GMT, to help gauge the economic outlook.
"If we do not see any acceleration in bias from the bank in terms of easier policy that could provide a little bit of support for cable (sterling/dollar), assuming we do not see a collapse in the labour market," said Jeremy Stretch, head of currency strategy at CIBC World Markets.
Monetary easing involves pumping cash into the economy through bond-buying and tends to weigh on a currency by increasing its supply.
Stretch said there was a growing perception in the market that BoE asset purchases are on hold until new governor Mark Carney takes over in July, and that could help support sterling.
The pound dipped 0.1 percent on the day to $1.5344, but held within sight of last week's two-month high of $1.5412, where there is likely to be strong resistance.
The euro rose 0.1 percent against the pound to 85.86 pence, hovering just below the previous day's four-week high of 86.01 pence.
Sterling showed little reaction to the International Monetary Fund cutting Britain's growth outlook and urging the government to consider loosening its budget policy.
But strategists said demand for the pound was likely to be subdued ahead of the release of first-quarter gross domestic product data next week. Economists say it remains a close call on whether the British economy will slide back into recession.
"We will be looking closely at the (Monetary Policy) Committee's assessment of the current growth outlook, any suggestion of a downside risks to Q1 GDP ahead of next week's release could weigh on sterling performance," Lloyds analysts said in a note.
A Reuters poll found that while the economy will narrowly skirt recession when the GDP data is released next week, growth is likely to be tepid.
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