Sterling edges lower ahead of BoE’s monetary policy decision – London Business News | Londonlovesbusiness.com

The British pound is edging slightly lower after yesterday’s rebound, particularly against the US dollar, due to a stronger uptick in US bond yields.

Despite today’s pullback in the early European session, the pound-dollar pair could remain stable in anticipation of the Bank of England’s (BoE) monetary policy decision.

Despite UK inflation reaching its 2% target for the first time in nearly three years, the BoE could maintain rates at 5.25%, delaying cuts.

Although inflation hit 2% in May, the BoE could remain concerned about the 5.7% increase in services price inflation which was higher than expected, likely postponing a rate cut until Q4. While the market expected a cut in August, bets have been declining, targeting a later date.

Changing expectations could support the pound against the dollar. However, traders could react to the central bank’s votes and statement today, which could give more clues about the future direction of monetary policy. The pound could thus see increased volatility in case of a surprise.

A softer stance could weigh on UK yields which have been sliding for a couple of days but rebounded to a certain extent ahead of the meeting.