CURRENCIES: Pound Climbs As Traders Wait For BOE's 'Super Thursday'

By Sara Sjolin, MarketWatch Features Dow Jones Newswires

Dollar rebounds slightly

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The pound inched higher in early trade on Thursday, with traders awaiting the Bank of England's so-called Super Thursday that could help steer expectations for the first rate hike in a decade.

Sterling rose to $1.3230, up from $1.3224 late Wednesday in New York. The U.K. currency has now risen more than 2% against the dollar over the past month, partly on heightened speculation the central bank is getting ready to tighten its ultraloose monetary policy.

The pound got a bump higher after a U.K. services purchasing managers' index for July came in better than expected at 53.8.

After the BOE's policy-setting meeting in June, when three members voted in favor of a rate increase, markets had started to price in a hike as early as the August meeting, which is now taking place. However, after a slowdown in July inflation, analysts broadly agree the central bank will hold its fire for now.

"I do not expect the outcome of today's meeting to result in a rate hike. Firstly, because consumer prices slipped from 2.9% to 2.6% in June, suggesting that the central bank may need to assess whether prices will ease further, after topping out in May," said Hussein Sayed, chief market strategist at FXTM, in a note.

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"Secondly, there's still no clear transition deal for Britain's relationship with the EU after Brexit. I believe these two factors will keep the BOE on hold for now, but this does not necessarily mean the rally in GBP is over," he added, referring to the country's planned exit from the European Union.

In addition to the rate decision on Thursday, the BOE will release minutes from the meeting as well as its quarterly inflation report. This triple release has led to the "Super Thursday" moniker. The reports will all come out at noon London time, or 7 a.m. Eastern Time, followed by a press conference by BOE Governor Mark Carney at 12:30 p.m.

"A rate hike would still be a big surprise, but probably less so than at any time in that last eight years. Assuming rates remain on hold, the quarterly inflation report will be key. We think the central bank will try to emphasize slowing growth, the main reason to keep rates low over rising inflation," Jasper Lawler, head of research at London Capital Group.

Read:Confusion reigns for investors ahead of Bank of England's 'Super Thursday' (http://www.marketwatch.com/story/confusion-reigns-for-investors-ahead-of-bank-of-englands-super-thursday-2017-08-01)

In other currencies, the dollar rebounded slightly on Thursday. The ICE Dollar Index gained 0.1% to 92.97 after trading around a 15-month low on Wednesday (http://www.marketwatch.com/story/dollar-languishes-at-15-month-low-with-adps-jobs-report-waiting-in-the-wings-2017-08-02). Traders are looking ahead to Friday's closely watched nonfarm-payrolls report.

The euro fell to $1.1836, down from a more-than-two-year high of $1.1857 late Wednesday in New York.

The dollar was almost flat against the yen , buying Yen110.69 compared with Yen110.74 on Wednesday.

(END) Dow Jones Newswires

August 03, 2017 04:35 ET (08:35 GMT)