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The dollar falls against the pound as attention shifts to the BoE

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In Science and Space: The British pound fell against a broadly strong dollar on Wednesday, with investors turning to Thursday’s announcement by the Bank of England, which is expected to raise interest rates for the sixth consecutive month. Financial markets are now pricing in more than 90% of the chances of a mega 50 basis point rate hike at Thursday’s meeting, according to Refinitiv data. More than 70% of 65 analysts and economists expect a 0.5 percentage point hike from the bank’s monetary policy committee this week, according to a Reuters poll conducted between July 27 and August 1.

Meanwhile, Federal Reserve Board members Charles Evans, Mary Daly, Loretta Mester, and James Bullard remain committed to raising interest rates to levels that they and their colleagues bring inflation back to target. By 1506 GMT, Sterling fell 0.48% to $1.2100 against the stronger dollar, further away from his one-month high set on Monday. Against the euro, the pound was little changed at 83.585 pence, just below his 15-week high on Tuesday.

But analysts said Wednesday’s pound ahead of Thursday’s policy announcement was largely driven by external factors. “The pound is on the verge of a Bank of England rate hike tomorrow,” said Michael Hewson, chief market analyst at CMC Markets UK, following recent dovish statements by Fed officials and He said the dollar rose as services rebounded after a strong US data. The US non-manufacturing purchasing manager’s index recovered last month to 56.7 from 55.3 in June, ending a three-month decline, according to the Institute for Supply Management.

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Ahead of Thursday’s meeting, ING analysts said some members of the Bank of England (BoE) have stressed the pound has a role to play in setting monetary policy, with the trade-weighted pound expected to drop in July. “The Bank of England is likely to favor a stronger pound as petrol prices remain high and the dollar is likely to remain strong,” it said in a statement. Meanwhile, UK survey data confirmed that service sector activity grew at a slower rate in July than in early 2021, when the country was under coronavirus lockdown, but price pressures had been relieved.

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