There will be uncertainty over the UK interest rate decision and wider global uncertainty will also remain an important feature. In this environment, volatile trading is liable to remain a key feature with a slightly firmer Sterling trend.
Sterling initially edged lower on Tuesday as the substantial Australian interest rate cut reinforced expectations of a further Bank of England reduction this week with lows near 1.4150 against the dollar. As stock markets rallied, the UK currency pushed to a high above 1.4450 against the dollar with choppy trading still a key feature and Sterling initially retained a firmer tone on Wednesday.
The UK PMI index for the services sector rose to 42.5 in January from 40.2 the previous month which was stronger than expected. The data will trigger some further speculation that the Bank of England could be less aggressive on Thursday and will provide some near-term Sterling support, although the index was still the fourth lowest on record.
Markets will still consider a further cut in interest rates to 1.00% the most likely outcome, but there are likely to be some reservations over aggressive selling of the UK currency ahead of Thursday's decision.