BY Yasin Ebrahim
Investing.com – The pound rose on Wednesday to remain on course for a third-straight weekly win against the dollar, shrugging off weaker-than-expected economic data ahead of the Bank of England meeting on Thursday.
GBP/USD rose 0.44% to $1.3123.
Services, the backbone of the UK economy, improved to a reading of 56.5 last month from 47.1 in June, though just missed economists' forecasts of 56.6.
The data suggest the U.K. recovery accelerated in July, but that was partly driven by pent-up demand, which will soon fade, Pantheon Macroeconomics said, flagging job cuts and higher savings as economic headwinds to come.
The pound's march higher comes just a day ahead of the Bank of England meeting.
The U.K. central bank is expected to keep interest rates unchanged but will roll out its forecasts on a range of economic measures including inflation, GDP and unemployment. In recent weeks, investors have been debating when the BoE will cut rates below zero, but Thursday's meeting is unlikely to offer detailed insight.
"Forecasts will be updated and could showcase the MPC’s bias toward downside risks," Scotia Economics said. "Expect further jawboning on the negative rate option, but it’s unlikely that the results of the BoE’s review of this option will be disclosed just yet. At present, markets are pricing a marginally negative policy rate commencing in early 2021."
Dutch Bank ING agrees.
"Negative Interest Rate Policy (NIRP) is under ‘active review’ at the BoE, but we think it a little too early for the BoE to make any decisive moves here," ING said. "We think the BoE will prefer to hold off on the use of NIRP until some clarity emerges on the UK-EU relationship from 2021. "