(Reuters) -Sterling rose against a weaker dollar on Monday, ahead of the Bank of England’s next policy decision due later this week.
The pound was up 0.29% versus the dollar
Newsflow in Britain was thin due to a bank holiday, and there are few major scheduled domestic events until the Bank of England’s Thursday meeting.
The BoE is widely expected to cut rates a further 25 basis points to 4.25%, but the statement accompanying its decision will be closely watched as some investors say it needs to accelerate its gradual approach to rate cuts as global growth takes a hit from Trump’s tariffs.
“We anticipate the BoE will downgrade its GDP forecasts due to the trade war,” Samara Hammoud, a currency strategist at Commonwealth Bank of Australia (CBA) wrote in a note to clients, adding she expected the BoE to stick to a gradual interest rate cutting cycle because inflation remains too high.
“There is a risk the BoE may remove the reference to a ‘gradual’ cutting cycle,” Hammoud said, which would lead the markets to possibly price more cuts from the BoE and cause the GBP/USD pair to fall closer to support at 1.3127.
Markets currently are pricing at least two more 25 basis point BoE rate cuts this year in addition to Thursday’s move, and see a good chance of a third.
The U.S. Federal Reserve is also meeting this week and is widely expected to leave rates steady on Wednesday following a solid March payrolls report.
Sterling traded a touch lower against the euro, at 85.26 pence to the common currency.
(Reporting by Linda Pasquini; Editing by Sharon Singleton)
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