Sterling Clings to Gains vs Euro in Quiet Day Ahead of BoE Meeting

By Joice Alves

LONDON (Reuters) – Sterling clung to gains against the euro on Wednesday but edged lower against the dollar on a quiet day as investors waited for Thursday’s Bank of England meeting.

The pound has gained broadly in the past few weeks amid optimism over Britain’s successful COVID-19 inoculation programme, with analysts pinning their hopes on a faster economic recovery than in the European Union, where vaccine rollout is lagging.

Market participants are focusing on the Bank of England’s meeting on Thursday at which the central bank is set to publish the findings of a consultation on what negative rates would mean for banks’ operations.

“I can see a fairly quiet day for sterling being on the cards given the magnitude of tomorrow’s Bank of England meeting,” said Simon Harvey, senior FX market analyst at Monex Europe in London.

Britain’s third national coronavirus lockdown has put the economy on course for a sharp contraction in early 2021, but services companies – buoyed by progress on vaccinations – are confident about recovery, the final version of the IHS Markit/CIPS UK Composite Purchasing Managers’ Index (PMI) showed.

With improved sentiment, most economists polled by Reuters said there is little chance the Bank of England will move to cut rates below zero this year.

In early London trading, sterling gained 0.1% versus the euro at 88.03 pence, not far from a eight-month high reached in the previous session against the single currency.

It was down 0.1% at $1.3650 versus a stronger dollar, after touching a one-week low against the greenback on Tuesday.

Health Secretary Matt Hancock said much of the attention need to be directed to any mutations of coronavirus that have been detected in recent days.

The COVID-19 vaccine developed by Oxford University and AstraZeneca gives good immune responses in older people, even if there is a lack of data about its exact efficacy, Oxford’s vaccine trial chief Andrew Pollard said on Wednesday.

(Editing by Angus MacSwan)