Sterling's Fate Hangs in Balance Ahead of BoE Decision

Sterling steadied near a multi-month low as markets awaited the Bank of England's rate decision, with speculation about a possible rate cut. Finance minister Rachel Reeves hinted at tax hikes to protect public spending. Expectations of a rate cut increased despite signs of easing inflation pressures.

Sterling steadied near its lowest point in months this Thursday as the financial world braced for a critical decision from the Bank of England. Markets have calculated a one-in-three chance of a rate cut, yet most analysts think the central bank will likely remain stationary.

Amidst anticipation, Sterling climbed slightly to $1.3066 prior to the BoE's 1200 GMT announcement, having fallen to a seven-month low at $1.3011. Against the euro, the pound showed slight weakness as the euro gained to 88.14 pence, its highest since May 2023.

Finance minister Rachel Reeves has hinted at impending tax increases to circumvent a return to austerity, amid her upcoming budget unveiling which emphasizes tough decisions for minimizing national debt. While inflationary pressures seem to be easing, uncertainty over rate cuts persists, despite previous expectations of a firm decision to uphold the current rate.

(With inputs from agencies.)