LONDON, Sept 20 (Reuters) - The British pound was little changed against the dollar on Tuesday, hovering barely above its lowest level since 1985, ahead of expected interest rate hikes from the Bank of England (BoE) and Federal Reserve (Fed).
In what is expected to be a big week for the pound, it also faces a "fiscal event" from British finance minister Kwasi Kwarteng, expected on Friday, where he is due to deliver more details on the size of the government's energy support package.
At 0933 GMT, the pound was little changed against the dollar at $1.1432, just above last week's 37-year low of $1.1351. GBP=D3
Against the euro, the pound was up 0.1% at 87.575 pence. EURGBP=D3
Money markets fully price in a half-point rate hike from the BoE on Thursday, with around a 75% chance of a larger 75 basis point rate rise, according to Refinitiv data.
Traders are also pricing in almost 200 basis points of tightening in the final three BoE meetings of 2022, taking the rate to 3.75% by the end of the year.
Meanwhile, economists polled by Reuters expect a 50 basis point hike this week and for the Bank Rate to end 2022 at 3%.
"Normally loose fiscal and tight monetary policy would be good for the pound," said ING global head of markets Chris Turner.
"However, it seems that foreign investors are concerned as to how government support will be financed," Turned added, noting that worries over the government's spending spree and a difficult external environment are leaving sterling "vulnerable".
Before the BoE and Kwarteng's mini budget, the Fed meets on Wednesday. Expectations of a hike of at least 75 basis points have been keeping the dollar index elevated near its highest level since 2002. =USD
The pound has fallen over 15% against the greenback this year, on track for its worst year versus the dollar since 2016, the year of the Brexit referendum.
Graphic: World FX rates in 2022http://tmsnrt.rs/2egbfVh
Graphic: Trade-weighted sterling since Brexit votehttp://tmsnrt.rs/2hwV9Hv
(Reporting by Samuel Indyk; Editing by Frank Jack Daniel)
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