* BoE decision at 1200 GMT, expected to refrain from more QE
* Likely to lift pound but any boost will be short-lived
* Outlook for UK economy still bleak given weak euro zone
* Pound up versus euro but hits 2-week low vs firmer dollar
LONDON Nov 8, Sterling hovered close to a
one-month high against a broadly weaker euro on Thursday and may
gain a short-term boost if the Bank of England votes against
more monetary stimulus.
Analysts, however, said any positive reaction to the bank's
decision, due at 1200 GMT, would be limited due to concerns
about whether the UK's economic recovery can be sustained given
a deepening recession in the euro zone, its key trading partner.
The euro was knocked by fresh speculation that Spain is in
no hurry to seek financial aid. But this also boosted safe-haven
demand for the dollar, pushing the pound to a two-week low
against the U.S. currency.
The euro fell 0.2 percent to a low of 79.73 pence
, just shy of a five-week low of 79.71 pence hit on
Wednesday. Further losses could see it target chart support at
79.64 pence, the 100-day moving average.
Against the dollar the pound fell 0.2 percent to $1.5940
, its weakest since Oct. 24. Traders reported demand to
sell the currency at levels above $1.60 which may limit any
"There are signs of recovery in the UK, but the euro zone
economy is shrinking and that will dent business confidence and
hamper sterling," said Nawaz Ali, market analyst at Western
Union Business Solutions.
"I don't expect the BoE to do anything today but I would
expect the meeting minutes in two weeks' time to suggest that
more QE is still on the table."
A majority of economists expect UK policymakers will not opt
to extend asset purchases under their quantitative easing (QE)
programme on Thursday due to stronger-than-expected UK growth in
the third quarter.
Prior to that data, most in the market had expected more QE
and some investors will therefore still be positioned for the
risk of this. This would boost the pound if policy is left
unchanged as these investors unwind those positions.
But investors will be wary that the BoE may opt for more QE
in December or early next year. QE is seen as negative for the
pound because it boosts the supply of the currency in the
The euro gained only a brief boost after Greece's parliament
approved new austerity measures, needed to secure the next
tranche of bailout money from international lenders.
Concerns about debt problems in Greece and Spain remain,
while recent data has suggested the German economy is suffering
the effects of deep economic problems in southern Europe. Data
on Thursday showed German exports fell in September at the
fastest pace since December 2011.
The pound was also expected to stay under pressure against
the dollar as worries about potential political paralysis when
U.S. lawmakers negotiate a solution to the looming 'fiscal
cliff' dented riskier currencies and lifted the safe-haven