Market Analysis

On Thursday, the pound dipped slightly against the dollar as investors awaited the Bank of England's policy meeting. The central bank is anticipated to maintain rates but provide indications on future rate cuts as inflation eases.

According to data from LSEG, there's a near-certainty, around 95%, that the BoE will keep its benchmark interest rate steady at 5.25%, its highest level since 2008. However, market sentiment suggests a 56% chance of a rate cut in June and a stronger likelihood, around 72%, of a cut in August, especially as the European Central Bank has signaled similar intentions.

Deutsche Bank strategist Jim Reid noted that while the consensus expects the BoE to keep rates unchanged, attention will be on the voting split, updated forecasts, and any forward guidance regarding potential future cuts.

Sterling slipped 0.15% to $1.2479, stepping back from a recent three-week high, and edged 0.06% lower against the euro, trading near a two-week low.

Potential interest rate cuts would be advantageous for Prime Minister Rishi Sunak ahead of an anticipated election this year, as he seeks to reassure voters about the economy, though facing challenges in opinion polls against the Labour Party.

The BoE's rate decision is scheduled for 1100 GMT, followed by a press conference led by Governor Andrew Bailey and other officials at 1130 GMT.

Paraphrasing text from "Reuters" all rights reserved by the original author.