LONDON (Reuters) -Sterling nudged higher but stayed near multiple-month lows on Thursday ahead of a Bank of England rate decision, with markets expecting a one-in-three chance of a cut, while Norway’s crown recovered some ground after its central bank held rates.
The dollar edged lower as a recovery in appetite for riskier assets pulled the U.S. currency off its recent peaks.
Sterling traded 0.21% higher at $1.3079 ahead of a 1200 GMT decision on rates after touching a seven-month low of $1.3011 on Wednesday. [GBP/]
Markets show traders are pricing in a roughly 32% chance of a cut, up from virtually zero just weeks ago. Helping reinforce that view, finance minister Rachel Reeves this week hinted at tax hikes that could weigh on the economy.
Reeves paved the way for broad tax rises to avoid a return to “austerity” on Tuesday, framing her second annual budget – due on November 26 – as one of “hard choices” to protect public spending while reducing Britain’s debt.
“The (BoE) meeting is likely to be interesting. We will receive new forecasts that should provide insight into how the BoE assesses the future development of inflation,” said Michael Pfister, FX analyst at Commerzbank, adding that he expected the central bank to hold rates at 4%.
“Even if interest rates remain unchanged, the pound could suffer if a combination of new forecasts, voting behaviour and the subsequent press conference suggest that an interest rate cut has only been postponed,” he added.
NOK RECOVERS AFTER NORGES BANK DECISION
The Norwegian crown currency was 0.2% higher against the euro at 11.71 after Norges Bank’s rate decision on Thursday. Against the dollar, it rose 0.4% to 10.17.
Norway’s central bank kept its policy interest rate on hold at 4.0% to combat inflationary pressure, as unanimously predicted by analysts in a Reuters poll, and reiterated that further easing was likely in the year ahead.
Norges Bank began the current easing cycle in June and cut the policy rate again in September.
Elsewhere, the dollar index, measuring the U.S. currency against six peers, fell 0.15% to 99.97, after climbing on Wednesday to its highest since May 2023.
“The market was a little bit more sensitive to the improvement in risk appetite,” said National Australia Bank’s senior currency strategist Rodrigo Catril in Sydney.
In the United States, data showed services sector activity increased to an eight-month high in October as new orders grew solidly, but subdued employment pointed to lacklustre labour market conditions against the backdrop of economic uncertainty stemming from the Trump administration’s tariffs.
The dollar fell 0.2% against the yen to 153.74 yen and 0.17% against the euro to 1.1513.
(Reporting by Joice Alves in London, additional reporting by Tom Westbrook in Singapore; Editing by Gareth Jones)
