The Bank of England decision to hold interest rates steady will provide some near-term Sterling support, but there will… … be expectations of a interest rate cut within the next few meetings.

Sterling drifted weaker ahead of
Thursday's Bank of England interest rate decision with speculation that rates
could be cut, although the UK currency found support below 2.03 against the
dollar.

In the event, the bank left rates
at 5.75% and did not issue a statement with the decision. The breakdown of the
vote and any policy splits will also not be known until the minutes are released
in two weeks time. The positive Sterling impact will be offset by expectations
that there will be a cut within the next few months and the UK currency drifted
lower in early Europe on Monday.

The UK housing trends
will continue to be monitored very closely as the sector still poses very
important downside risks to the economy as a whole. The UK currency has also
been undermined to some extent by reports that the government will downgrade
growth forecasts.

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