Sterling edged lower against a stronger dollar on Thursday as investors looked ahead to a policy decision from the Bank of England, which is widely expected to leave rates on hold but could unveil changes to its bond sales programme.
The pound fell 0.13% to $1.36125 after touching its highest since July 2 at $1.3726 in the previous session.
The U.S. dollar firmed, extending its rebound after plunging to a 3-1/2-year low earlier in the week, as markets adjusted to the Federal Reserve's measured stance on further interest rate cuts.
The U.S. dollar firmed, extending its rebound after plunging to a 3-1/2-year low earlier in the week, as markets adjusted to the Federal Reserve's measured stance on further interest rate cuts.
Data on Wednesday showed British inflation running at an annual 3.8% in August, reinforcing expectations that further rate cuts are unlikely in the near term.
"Main focus will instead be on any changes to their forward guidance and the QT decision," Deutsche Bank said in a note.
Deutsche Bank chief UK economist Sanjay Raja sees a "material risk" that policymakers abandon their "gradual and careful" language on the downward path for Bank Rate.
Raja expects the BoE to trim its quantitative tightening envelope from 100 billion pounds to about 70 billion pounds, with a range of 65-75 billion pounds.
Sterling held steady against the euro , which traded at 86.74 pence.
($1 = 0.7348 pounds)
