Pound Stabilizes Ahead of Critical BoE Meeting Amid Global Market Shifts

The British pound steadied on Wednesday as traders adjusted positions before Thursday's Bank of England meeting. Despite stabilizing, the pound remains near a seven-month low versus the dollar and a two-year low against the euro. Market expectations for a rate cut influence its movements.

On Wednesday, the British pound stabilized as traders fine-tuned their positions ahead of the critical Bank of England meeting set for Thursday. Despite its current steadiness, the pound trades near a seven-month low against the dollar and its weakest point in over two years against the euro. Market analysts are currently pricing in about a one-in-three chance of a 25-basis-point rate cut, which could lead to volatile reactions depending on the BoE's decision.

Sterling showed a modest increase of 0.2% against the dollar, trading at $1.3049, although it briefly dipped to $1.3011 during early Asian trade, marking its lowest since mid-April. Meanwhile, the euro edged down by 0.1% to 88.07 pence after reaching 88.3 pence earlier in Asian markets, its highest since May 2023.

Last month's data, including unexpected cooling in inflation rates, led markets to anticipate BoE easing, weighing on the pound. Chris Turner, global head of markets at ING, noted that the recent downturn might be more attributable to a global stock market correction. Additionally, Britain's forthcoming budget and potential tax hikes discussed by Finance Minister Rachel Reeves could impact growth prospects and influence BoE's future rate decisions.

(With inputs from agencies.)