LONDON: The pound steadied against the dollar on Thursday, ahead of a Bank of England meeting at which the central bank is expected to keep UK rates on hold, although there is a degree of uncertainty over what it might say about the outlook for monetary policy.
This week brings a raft of central bank decisions.
On Tuesday the Bank of Japan ditched negative interest rates and raised rates for the first time in 17 years, while on Wednesday the Federal Reserve maintained its view that US interest rates would likely be subject to three cuts this year.
The Swiss National Bank and the Norges Bank both deliver decision on Thursday as well.
Traders are attaching a strong chance of the first Fed cut coming in June and rates are expected to end the year around 4.50%, down from a range of 5.25-5.50% now.
The BoE might not cut much before August, but inflation figures on Wednesday that showed a cooling in consumer price pressures brought June into play, where traders see a roughly 60% chance of a drop.
“Our BOE watch list includes the BOE decision split – will there be anyone voting for a hike? With progress made on wage increases and inflation, there is a chance no one will vote for a hike at this meeting.
This could be seen as a step closer to the BOE cutting interest rates,“ XTB research director Kathleen Brooks said. Sterling was last unchanged on the day at $1.2788.
It has risen 1.3% so far this month and is heading for its largest monthly gain against the dollar since November.
The euro was trading flat against the pound at 85.47 pence, having lost 0.2% so far this month.
The likelihood of a larger premium of UK rates over those elsewhere has helped sterling perform better against the dollar this year than any other G10 currency.
Bank of England to hold rate despite slowing inflation
The pound is up 0.5%, topping runner-up, the Chinese yuan, which has lost 0.2% in value against the US currency this year in the offshore market, and well beyond the Japanese yen, the biggest laggard, which has fallen around 7%.
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