Sterling slides ahead of BoE most unpredictable meeting in years

Reuters

Published Nov 04, 2021 09:43

By Joice Alves

LONDON (Reuters) - Sterling fell against a strengthening dollar on Thursday but the slide was capped by some expectations that the Bank of England could become the first major central bank to raise interest rates since the coronavirus pandemic.

The BoE will deliver its most unpredictable policy decision in years at 1200 GMT, when it will either raise borrowing costs from an all-time low or say it is waiting to ensure the post-lockdown economy is ready for a rate hike.

Ahead of the meeting, sterling slid 0.4% versus dollar to $1.3630 by 0815, after touching a weekly high during Asian trading hours.

Versus the euro, the pound fell 0.1% to 84.74 pence, just off a three-week low of 85.13 pence touched this week.

Markets are pricing in a rate rise to 0.25% from 0.1%, but economists polled by Reuters said it was too close to call, as Britain grapples with balancing rate rises to combat inflation with worries about the growth outlook.

Analysts at Citi, who expected a 15 basis point interest rate increase, suggested the currency could still not get a massive boost from the hike.

"In line with our marginally dovish base case, we’d see modest GBP downside and EURGBP upside around the meeting," Citi analysts said in a note.

Sterling is down almost 2% versus the dollar in the past three months, with several signals by BoE that the bank was ready to act to contain growing inflation only moderately supporting sterling as Britain faced a crisis over fuel and shortages of workers.