Ammon News - Sterling rose against a weakening dollar after the Federal Reserve cut interest rates by 50 basis points, with investors awaiting the outcome of the Bank of England policy meeting on Thursday expected to keep borrowing costs on hold.

The pound briefly hit $1.3297, its highest level since March 2022, right after the Fed announcement on Wednesday. It was last up 0.35% at $1.3257 .

Sterling had risen on Wednesday as data showed that British inflation held steady in August but rose in the services sector, which is closely watched by the BoE, to 5.6% from 5.2% in July.

Money markets priced in a 20% chance of a 25 basis points rate cut from the BoE on Thursday, from roughly 28% right after the inflation data.
The BoE will keep its main interest rate at 5.00%, but reduce it in November even though inflation is expected to stay above the central bank's 2% target, a firm majority of economists in a Reuters poll predicted.

"We expect no change from either (the BoE or the Bank of Japan policy meetings), but flag the increase in dovish risks around the BoE decision as a potential catalyst for a tactical sterling pullback," said Alvise Marino, forex strategist at UBS.

The pound rose 0.05% versus the euro at 84.12 pence per euro.

Analysts flagged that the BoE Monetary Policy Committee would also have more information on the fiscal outlook, with the Autumn Budget slated for Oct. 30.

Reuters