Sterling steady as market awaits QE decision

Sterling was steady on Thursday as markets prepared for a UK monetary policy decision which analysts said could put the pound under further pressure if the Bank of England relaunches its scheme to boost the economy by pumping in fresh cash.

The central bank will announce its latest decision on interest rates at 1100 GMT. No change in rates is expected with focus on whether the BoE decides to start a second round of quantitative easing to try and stimulate growth in Britain's ailing economy, which is being put under further pressure as the euro zone's debt crisis deepens.

Economists in a Reuters poll do not expect further QE to be announced today by the bank's Monetary Policy Committee, but analysts said it would be a finely balanced decision.

"It's a close call as to whether the MPC go for more QE today. We'd need to see a large shift in MPC voting pattern for that to occur," said Lee Hardman, currency strategist at BTM-UFJ.

Minutes of September's MPC meeting showed that Adam Posen continued his long-standing call for an extra 50 billion pounds of asset purchases, and that most of the other eight policymakers thought it "increasingly probable" that looser monetary policy would become warranted in future.

Of those eight, some said a continuation of weak economic conditions would be enough to justify QE, and the majority said that their decision in September had been finely balanced.

"There's more chance that they will coincide QE with the November inflation report, but either way we don't see the downtrend for sterling being broken, even if there is a small bounce after today's decision should the BoE continue with its QE pause." he added.

Sterling was down around 0.1 percent on the day against the dollar at $1.5455, holding above Monday's two-week low of $1.5340. Traders said the September low of $1.5326 was the key level to break, a move below which would take the pound to lowest levels since September 2010.

Selling interest was reported in the $1.5500 region with stop-losses placed above.

"Should the BoE delay additional QE, we could get an initial GBP relief rally. However this will consequently mean the market will anticipate an announcement at the November meeting. This will ultimately see downward pressure on GBP," said analysts at Lloyds Banking Group in a note.

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