LONDON (Reuters) - Britain’s pound hovered near a one-week low versus the dollar on Thursday as the market temporarily shifted its focus from next month’s parliamentary election to a Bank of England policy meeting.
With a snap election due on Dec. 12 and a new Brexit deadline set for Jan. 31, the BoE is expected to keep its key policy rate unchanged at 0.75% and not give an explicit steer on where interest rates are headed.
“One of the problems the BoE has is that you have binary events coming up - the election and Brexit,” said Berenberg senior economist Kallum Pickering. “So from a pure policy point of view, the BoE doesn’t pre-empt these events.”
Sterling briefly dipped to a one-week low of $1.2837 before steadying around $1.2865.
Against the euro, the pound was steady on the day at 86.09 pence.
Increasingly economists believe the BoE will cut interest rates at some point next year given a slowing economy and Brexit uncertainty. Financial markets are pricing in a roughly 55% chance of a 0.25 percentage point cut in 2020.
Deutsche Bank economists say they no longer forecast a hike next year and instead see an increasing risk of a rate cut when the BoE delivers its January inflation report - Governor Mark Carney’s final MPC meeting.
Reporting by Dhara Ranasinghe; Editing by Hugh Lawson