Sterling's early August volatility may continue through the Bank of England's monetary policy announcement on Thursday and accompanying commentary.
The pound might weaken if the BoE springs a dovish surprise or gain if the Old Lady is less downbeat than expected. No change to Bank Rate or asset purchases is expected, so the tone of the accompanying MPC minutes and quarterly Monetary Policy Report is of prime interest .
Economists polled by Reuters last month forecast that the BoE will increase its quantitative easing programme by 70 billion pounds in the fourth quarter and keep Bank Rate at 0.1% . The BoE's QE programme was most recently increased in June, by GBP 100 billion.
GBP/USD has been volatile since August began, after racking up its biggest monthly rise since May 2009 in July. Cable fell by 108 and 126 pips from respective intra-day highs of 1.3113 and 1.3108 on Monday and Tuesday, before reclaiming a 1.31 handle on Wednesday.
(Robert Howard is a Reuters market analyst. The views expressed are his own)
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