The pound edged lower on Thursday as investors await the Bank of England’s interest rate decision, with markets expecting a hold.
The pound was down 0.1% against the dollar (GBPUSD=X), at $1.3248 and muted versus the euro (GBPEUR=X), at €1.1575.
The US dollar index (DX-Y.NYB), which measures the currency against a basket of six major peers, rose 0.1% to 100.21.
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Members of the Monetary Policy Committee (MPC) are expected to keep interest rates unchanged at 3.75% at noon as the Iran war risks driving up inflation with higher energy prices.
Edward Allenby, senior UK economist for Oxford Economics, said: “The UK inflation outlook was starting to brighten, but the conflict in the Middle East has thrown a spanner in the works.”
“Against this backdrop, it’s almost certain that the MPC will keep bank rate unchanged at 3.75% at the March meeting.”
“If the shock proves short-lived and recent price rises fully reverse, we still think there’s a reasonable chance that the MPC will resume its cutting cycle either in April or June.”
“However, if the surge in energy prices persists or goes higher, the MPC will be set for an extended pause.”
Bank of America economists now expect two Bank Rate cuts in June and September, delayed from its previous forecast of March and June.
The US Federal Reserve decided to hold interest rates steady at 3.50%–3.75% at its March policy meeting.
In equities, the FTSE 100 (^FTSE) was lower on Thursday morning, falling 1.6% to trade at 10,135 points at the time of writing. For more details on market movements, check our live coverage here.
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