Sterling rose to trade above $1.27 for the first time in seven weeks against the dollar, as investors awaited a Bank of England quarterly report that is expected to upgrade its growth and inflation forecasts.
The central bank will probably try to avoid adding to speculation about a first interest rate hike in nearly a decade, even as it acknowledges the resilience of Britain’s economy since last year’s vote to leave the European Union.
With Britain, having outpaced the world’s other big rich economies last year, the BoE is expected to raise its 2017 growth forecast for the second time in three months.
Inflation is already set to overshoot the Bank’s 2 percent target in the coming months, having been boosted by a more than 10 percent fall in sterling since the EU referendum.
But while financial markets are pricing in a roughly 50-50 chance of a rate hike by the BoE this year, most economists say it probably will not happen until mid-2019, once Britain has wrapped up its Brexit negotiations and left the EU.
Rate decision followed by Inflation report and Mark Carney’s speech is due at 1200 GMT.