RTRS:Sterling hits four-week low vs. dollar, eyes on BoE report
(Reuters) - Sterling hit a four-week low against the dollar and dipped against the euro on Wednesday ahead of the Bank of England's inflation report, which some analysts say could see reduced growth forecasts and leave the door open for more easing.
Investors bought the relatively safe-haven dollar after efforts in Greece to form a coalition government broke down on Tuesday, heightening concerns the country could leave the single currency bloc.
The pound dropped to $1.5949, with investors averse to risk and wary of buying the currency ahead of the BoE's report.
The euro hovered above a 3-1/2 year low of 79.50 pence hit on Tuesday, with analysts expecting the common currency's downtrend to continue.
The central bank's quarterly Inflation Report and UK unemployment figures are due later, with some market commentators expecting the BoE to signal a more dovish tone.
"The market has gone cool on another round quantitative easing so that is not factored in," said Alan Wilde head of fixed income and currency at Baring Asset Management.
"If they were to flag something with immediate effect that could soften sterling. But the market expects a pause now from the bank and to wait for data from the second quarter."
Official figures showed the UK economy slipped back into recession in the first quarter, a factor that may prompt the BoE to lower its growth forecasts and hint at more money printing through its asset purchasing programme.
The bank decided halt quantitative easing (QE) at its rate meeting on May 10.
Yet Baring's Wilde said concerns about a stronger sterling could also be flagged in the report.
"As other central banks have deliberately tried to weaken their currencies it is not particularly helpful if sterling appreciates too far against a basket of currencies, some appreciation against the euro would be expected," he said.
Wilde added the BoE has steered clear of making comments about the rising strength of sterling but behind closed doors it was something which could come as a concern as a stronger pound could hurt exports.
Unemployment figures for the UK due at 0830 GMT are expected to show the total number of jobless at 8.3 percent in March, according a Reuters poll forecast.
