Sterling extends losses to seven-week low ahead of Bank of England decision

The British pound fell against a basket of global currencies in European trading on Thursday, extending its losses against the US dollar for a fourth consecutive day and hitting a seven-week low, as demand for the US currency remained strong following the Federal Reserve’s hawkish meeting.

The Bank of England concludes its regular monetary policy meeting later today, with the central bank expected to leave UK interest rates unchanged for a sixth consecutive meeting.

The Price

• Sterling fell 0.1% against the dollar to $1.3369, its lowest level since July 30, from an opening price of $1.3380, while recording a high of $1.3402.

• The pound lost 0.72% against the dollar on Wednesday, marking its third consecutive daily decline, following the Federal Reserve’s decisions.

US dollar

The US Dollar Index rose by less than 0.1% on Thursday, extending its gains for a fourth consecutive session and hitting a seven-week high, reflecting continued strength in the US currency against a basket of major and minor currencies.

The dollar’s advance comes amid continued demand for the US currency as a preferred investment following the outcome of the Federal Reserve meeting, which proved more hawkish than markets had expected.

The US central bank raised interest rates by 25 basis points to 4.0%, marking the first increase in US rates since July 2023, and raised its target rate projection for this year as it seeks to counter mounting inflationary pressures in the United States.

Bank of England

The Bank of England concludes its regular monetary policy meeting later today, with the central bank expected to leave UK interest rates unchanged at 3.75%, their lowest level since December 2022, for a sixth consecutive meeting.

The UK interest rate decision and monetary policy statement are due at 11:00 GMT, alongside the release of the vote on the rate decision.

Bank of England Governor Andrew Bailey will speak at a press conference at 11:30 GMT to discuss the outcome of the monetary policy meeting, developments in the battle against inflation and the outlook for interest rates.

Sterling outlook

We expect that if the Bank of England and Andrew Bailey deliver more hawkish comments than markets currently anticipate, expectations for a UK interest rate hike in November will increase, easing the downward pressure on sterling.