By Samuel Indyk
LONDON, Feb 2 (Reuters) - The pound held steady against the dollar on Monday near a multi-year high hit last week as attention focused on a Bank of England policy announcement on Thursday.
Sterling was last up less than 0.1% versus the dollar at $1.3696. It hit $1.3867 last week, its highest since September 2021, but retreated on Friday as the U.S. currency strengthened after U.S. President Donald Trump nominated Kevin Warsh to lead the Federal Reserve.
Against the euro, the pound was
little changed at 86.61 pence.
BANK OF ENGLAND SET TO HOLD
Attention this week is on the BoE, with the central bank expected to hold its benchmark interest rate at 3.75% when it announces policy on Thursday, according to all but two economists surveyed by Reuters in a January poll.
Data has remained robust since the last meeting when the central bank lowered the Bank Rate, while inflation remains the highest among Group of Seven industrialised peers, suggesting that the BoE can hold off from cutting rates for now.
The last two meetings have seen rate-setters deeply divided, but the decision this time should be more straightforward.
"This week we could, for once, have a boring Bank of England meeting," said Mohamad Al-Saraf, FX and fixed income associate at Danske Bank, who expects the central bank to keep the interest rate on hold.
"We don't expect something major in terms of market reaction, and we don't believe it will have major implications for the pound."
MANUFACTURING IMPROVING
A closely watched barometer of the health of Britain's manufacturing sector, the S&P Global Manufacturing Purchasing Managers' Index, rose to its highest since August 2024 last month, a survey showed on Monday, adding to signs of a pick-up in the economy after a sluggish end to 2025.
"We take encouragement from how stable the PMI has been in recent months, with the output index holding above 51.0 for three of the past four months," said Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, in an emailed note.
"A broad improvement in the PMI's sub-indices in January also provides us with further encouragement that the steady momentum seen in recent months can be maintained."
The data had little impact on expectations for BoE policy, with money market traders fully pricing in just one quarter-point rate cut in 2026, and around a 50% chance of a second.
(Reporting by Samuel Indyk; Editing by Jan Harvey)
