The British currency remained in sight of one-week lows against the dollar on the eve of a knife-edge rate decision by the Bank of England.
The central bank is due to announce its rate decision on Thursday, which has pushed the pound down this month. A series of dovish statements by policymakers led to speculation that an imminent rate cut could be likely.
Investors are divided as to whether it will cut rates on the eve of the BoE rate decision. Money markets currently price a 46% chance of a 25 basis point rate cut to the BoE’s 0.75% policy rate – compared to around 70% at the start of last week.
The pound fell 0.1% against the U.S. dollar in early London trade at $1.3012. It was up 0.1% against the euro at 84.50 pence.
Last week, the European Central Bank left its policy unchanged and launched a “strategic review” of its inflation goal and tools.
The Fed is not expected to change interest rates when it gives its decision on Wednesday at 1900 GMT. But investors will want to hear whether chairman Jerome Powell retains his cautiously upbeat language. Also, officials likely to discuss possible changes to how they manage the U.S. central bank’s key overnight borrowing rate.
Britain will formally leave the European Union on Friday.
START TRADINGForex – Investors divided on the eve of BoE rate decision
There was evidence that investors were becoming more relaxed about the likely economic impact of the virus, especially in China. However, concern remained elevated. Investors awaited a policy decision from the U.S. Federal Reserve later in the day.
The dollar index increased 0.1% to 98.091, while the euro was down 0.2% versus the U.S. currency at $1.1001. The dollar’s strong showing this week, helped by the relatively positive performance of the U.S. economy, has underlined its safe-haven credentials.
The greenback is now up 1.8% against a basket of major currencies so far in 2020, ahead of a Federal Reserve meeting later on Wednesday.
The yen jumped earlier this week as investors bought into a currency considered a safe store of value in times of stress. On Wednesday it traded up 0.1% at 109.06 yen per dollar.
The Australian dollar briefly extended its rebound from 3-1/2-month lows after firmer-than-expected inflation data. The Aussie then succumbed to selling pressure and was last down 0.2% at $0.6748.
The Swiss franc rallied 0.1% to 1.0720 francs per euro, some way off Tuesday’s nearly three-year high of 1.0666.
Britain’s pound was little changed at $1.3058 on the dollar and at 84.43 pence per euro.
Gold prices rose on Wednesday, propped up by lingering concerns over the economic impact of a coronavirus outbreak in China.
Spot gold was up 0.2% at $1,569.38 per ounce at 1323 GMT, having fallen about 1% in the previous session. U.S. gold futures were little changed at $1,569.30 an ounce.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money