Sterling under pressure ahead of BOE decisions

Sterling fell in European trade on Thursday against a basket of major rivals, extending losses for the third straight day against the dollar and moving away from three-week highs on profit-taking, as investors shun risks ahead of the BOE’s policy decisions.

The Bank of England is expected to maintain interest rates unchanged for the sixth meeting in a row, but will likely provide clues on the future path of UK rates. 

The Price 

The GBP/USD fell 0.2% to $1.2477, with a session-high at $1.2502, after closing down 0.1% on Wednesday, on profit-taking off three-week highs at $1.2635.

The BOE 

The Bank of England is widely expected to hold interest rates unchanged at 5.25% on Thursday, the highest since 2008, for the sixth straight meeting. 

US Rates

According to a tool tracking UK interest rate odds, there’s a 50% chance the BOE might cut interest rates in June, and a 100% chance of such a cut in August. 

This week’s meeting will provide fresh pricing for these potential rates. 

The BOE has more than once expressed its reluctance to raise interest rates when it had to face inflationary pressures, however it expressed eagerness to cut rates at the first chance possible. 

The chance is now nigh following recent speeches by BOE Governor and his deputy in recent weeks, which boosted the odds of a June rate cut. 

Sterling’s Outlook 

MUFG Bank’s chief forex researcher said the BOE is likely to present a bearish stance on economic conditions, which would boost the case for cutting interest rates soon.