Sterling edges back from six-week high, BoE in focus

Sterling edged lower on Wednesday after climbing to a new six-week high on hopes for a last-minute Brexit deal, while investors turned their attention to the Bank of England meeting on Thursday. The pound fell 0.2% in early European trade to $ 1.2476, but that followed a decent gain on Tuesday to $1.2528 on the back of optimism that Prime Minister Boris Johnson was trying to secure a Brexit deal with the European Union before the Oct. 31 deadline.

Investors have been reassured by British lawmakers voting to block a no-deal Brexit on Oct. 31, helping sterling to rally strongly over the past week. "The pound continues to benefit from building optimism over the potential for a last-minute Brexit deal and more likely a short Article 50 extension which has both helped ease more immediate no-deal Brexit risks," MUFG analysts said in a research note sent to clients.

Consumer price data for August is due at 0830 GMT, and economists polled by Reuters expect a reading of 1.9%, down from 2.1% the prior month. Against the euro, sterling was unchanged at 88.585 pence.

The BoE is expected to keep interesting rates at 0.75% on Thursday when it meets. Policymakers have said rates could rise or fall in the event of a no-deal Brexit. The Financial Times reported that the appointment of Governor Mark Carney's successor was set to be pushed back until after a forthcoming election, which Johnson wants to call.

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