Sterling hovers near one-week low vs dollar ahead of BoE

Wads of British Pound Sterling banknotes are stacked in piles at the Money Service Austria company's headquarters in Vienna, Austria, November 16, 2017. REUTERS/Leonhard Foeger/Files

LONDON (Reuters) - Britain’s pound hovered near a one-week low versus the dollar on Thursday as the market temporarily shifted its focus from next month’s parliamentary election to a Bank of England policy meeting.

With a snap election due on Dec. 12 and a new Brexit deadline set for Jan. 31, the BoE is expected to keep its key policy rate unchanged at 0.75% and not give an explicit steer on where interest rates are headed.

“One of the problems the BoE has is that you have binary events coming up - the election and Brexit,” said Berenberg senior economist Kallum Pickering. “So from a pure policy point of view, the BoE doesn’t pre-empt these events.”

Sterling briefly dipped to a one-week low of $1.2837 before steadying around $1.2865.

Against the euro, the pound was steady on the day at 86.09 pence.

Increasingly economists believe the BoE will cut interest rates at some point next year given a slowing economy and Brexit uncertainty. Financial markets are pricing in a roughly 55% chance of a 0.25 percentage point cut in 2020.

Deutsche Bank economists say they no longer forecast a hike next year and instead see an increasing risk of a rate cut when the BoE delivers its January inflation report - Governor Mark Carney’s final MPC meeting.

Reporting by Dhara Ranasinghe; Editing by Hugh Lawson