Sterling rises versus euro ahead of BoE meeting

Sterling edged higher against the euro on Thursday ahead of a Bank of England meeting expected to maintain the central bank’s 895 billion-pound bond-buying programme, but it stabilised against the dollar amid a rise in bond yields.

The pound rose 0.3% to 85.51 pence at 0945 GMT. It was flat against the dollar at $1.3963, after touching a week high of $1.4001 at 0710 GMT.

The BoE will announce its latest policy at 1200 GMT, with analysts expecting the central bank to keep its crisis-fighting stimulus programme broadly unchanged.

“There is little expectation of anything other than policy inertia,” said Jeremy Stretch, Head of G10 FX Strategy at CIBC Capital Markets.

But he expects the central bank to underline an improving outlook and noted that the budget provided a modest fiscal expansion.

In early London trade, U.S. bond yields rose boosting the dollar as the Federal Reserve said it expected U.S. economic growth and inflation during a recovery from the COVID-19 pandemic this year and repeated its pledge to keep its target interest rate near zero.

Ten-year Treasury yields hit their highest levels in 13-months in morning deals in London, climbing above 1.70% for the first time since Jan. 24, 2020.

British government bond yields rose to a one-year high.

Sterling is one of the top-performing G10 currencies this year amid Britain’s swift vaccine roll-out and declining numbers of COVID-19 infections.

But the health service warned on Wednesday of a big reduction in available vaccines from March 29.

Dwindling expectations that the BoE will push interest rates below zero, as well as the Brexit trade deal with the EU agreed in December, have also supported the pound this year, which rose above $1.42 on Feb. 24.