Sterling pushed lower ahead of BoE rate decision

Sterling dipped against the dollar on Thursday ahead of a Bank of England policy meeting, with the central bank anticipated to maintain rates unchanged but provide guidance on its intentions to reduce the cost of borrowing.

Based on London Stock Exchange data, money markets are indicating an approximately 95% probability that the BoE will maintain its benchmark interest rate at 5.25% - the highest level since 2008. However, investors will closely monitor indications of when the first interest rate cut in four years might occur amid falling inflation.

Currently, markets perceive a 56% likelihood of such a move in June, coinciding with the European Central Bank's signal to decrease borrowing costs. Additionally, there is a higher probability, at 72%, of a BoE rate cut in August.

Sterling declined by 0.15% to $1.2479, stepping back from the three-week peak of $1.2709 reached on Friday. Against the euro, the UK currency slipped by 0.06%, trading near a two-week low registered against the single currency on Wednesday.

Interest rate cuts would be favorable for Prime Minister Rishi Sunak ahead of an anticipated election later this year. Sunak has assured voters that the economy is on the mend, yet he faces challenges in opinion polls against the opposition Labour Party. The BoE rate decision is scheduled for 1100 GMT, followed by a press conference at 1130 GMT led by central bank Governor Andrew Bailey and other officials.

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