Sterling clings on near five-week low after BoE meeting

By Alun John

LONDON (Reuters) – The pound held steady just above a five-week low on Friday as traders continued to process the previous day’s 25 basis point Bank of England rate hike, and ahead of crucial U.S. jobs data.

After lifting rates by 50 basis points in June, the BoE, on Thursday, , but said high inflation meant rates would remain elevated for some time.

“The shift in emphasis from the level of restrictive rates to their duration suggests that the Bank of England’s Monetary Policy Committee is guiding towards the end of the tightening cycle,” said BNP Paribas (EPA:) analysts in a note.

The pound was fairly unmoved by the decision, and was last at $1.27065, flat on the day and only a whisker below its close on Wednesday, the day before the meeting.

BNP Paribas said this could partly “reflect that GBP has ‘done a lot’, having broadly weakened over the past few weeks, as markets have re-priced BoE expectations”.

“That said, we do not think this happy medium will continue, and see scope for weakness to resume.”

The analysts said that either the BoE pauses or hikes just once more, meaning rates and the pound need to adjust lower still, or, if more aggressive tightening is needed, markets may expect a greater hit to the British economy, also weighing on the pound.

was the best-performing major, developed-market currency against the dollar in the first half of the year, and reached as high as $1.3144 in mid July, when projections for peak BoE rates were well over 6%.

The pound was also steady against the euro on Friday, with one , largely in the middle of its recent range.

The day’s main event for currency markets is U.S. non farm payroll data due at 1230 GMT. Analysts say current market pricing leaves the dollar at risk of a shift lower, including against the pound, if jobs come in below expectations, or higher, if above.