Sterling Gains Against Euro but Slips Versus Dollar Ahead of Bank of England Rate Decision

LONDON: The British pound strengthened against the euro but weakened versus the U.S. dollar on Thursday as investors awaited the Bank of England’s latest monetary policy decision while heightened geopolitical tensions boosted demand for the dollar as a safe-haven currency.

Sterling fell 0.2% against the dollar to around $1.334, while rising 0.15% against the euro, which hovered near its weakest level since early July. Market participants expect the Bank of England to leave interest rates unchanged, although traders continue to price in at least one 25-basis-point rate increase before the end of the year.

Investors are closely watching the outcome of the Bank of England’s Monetary Policy Committee meeting, particularly the voting split and Governor Andrew Bailey’s remarks, for clues on the future direction of interest rates. Analysts said a more hawkish-than-expected vote could provide further support to sterling.

Despite Thursday’s decline against the dollar, sterling remains among the best-performing major currencies against the U.S. currency so far in 2026, supported by expectations that UK interest rates will remain relatively high. However, renewed conflict in the Middle East has strengthened the dollar by increasing demand for safe-haven assets and pushing oil prices higher.

The currency market reaction also followed the U.S. Federal Reserve’s decision to keep interest rates unchanged, while offering limited guidance on future policy moves, leaving investors focused on upcoming decisions from other major central banks. In the UK, attention is also turning to the new government’s forthcoming budget, which is expected to influence the country’s economic outlook.