LONDON, Sept 23 Reuters - On Thursday, sterling rose along with most risk currencies as concerns over the Evergrande Debt Crisis eased and traders waited for the Bank of England meeting and signals for the outlook for policy tightening.
The pound fell this week as the panic that Evergrande would default on its debts sent investors into safer assets and currencies.
Attention now turns to the BoE Rate Decision, due at 1100 GMT.
Rate-setters meetings are unlikely to vote for an early end to COVID - 19 stimulus, especially after Britain's economic growth slowed unexpectedly in July and consumer price inflation saw a record jump to nine-year high.
Markets responded to the inflation numbers by bringing forward rate hike expectations off the record low of 0.1% until May 2022.
Investors will now be watching closely for any signs that BoE policymakers do not view the rise in price growth quite as transitory after they earlier said inflation could temporarily hit 4% by year-end.
Some analysts said the recent tone of the Federal Reserve in its policy update on Wednesday raised expectations that the BoE could not sound as dovish as previously as central banks worldwide plot a path out from pandemic-era stimulus.
In light of the updated repricing of BoE rate hike expectations, market participants will be closely scrutinizing the updated policy communication for any signal that the BoE is moving closer to raising rates, MUFG analyst Lee Hardman said in a note today.
Nevertheless, we believe that there is a greater risk of disappointment which could trigger a temporary correction lower for the GBP. We expect the BoE to formally follow the policy message of August when they had adopted a gradual tightening bias. The pound was lost against the euro 0.2% at $1.3648 and the pound was flat at 85.85 dollar.