Sterling steadies near multi-month lows ahead of BoE decision

LONDON, Nov 6 (Reuters)EURGBP= - Sterling steadied around its lowest in months on Thursday ahead of a key Bank of England rate decision, with markets pricing a one-in-three chance of a cut, while most analysts believe the central bank will likely hold fire.

Sterling GBP= edged 0.1% higher to $1.3066 ahead of a 1200 GMT BoE rate decision, after hitting a seven-month low of $1.3011 on Wednesday. GBP/

The pound weakened a touch against the euro EURGBP=, which rose 0.1% to 88.14 pence after touching its highest since May 2023 on Wednesday.

Markets show traders are pricing a roughly 32% chance of a cut, up from virtually nothing just weeks ago. Helping reinforce that view, finance minister Rachel Reeves this week hinted at tax hikes that could weigh on the economy. 0#GBPIRPR

Reeves paved the way for broad tax rises to avoid a return to "austerity" on Tuesday, framing her second annual budget - due on November 26 - as one of "hard choices" to protect public spending while reducing Britain's debt.

What had until recently seemed likely to be a clear majority vote to keep the BoE's Bank Rate at 4.0% now looks much closer after inflation unexpectedly held steady in September and recent jobs data was welcomed by Governor Andrew Bailey as a sign that inflation pressures were easing.

U.S. investment bank Goldman Sachs last week changed its view and said it now expected a rate cut.

"Today, we see the BoE on hold despite mounting speculation of a pre-Budget cut," Francesco Pesole, FX strategist at ING.

"We think there are some upside risks for sterling today as markets may not receive clear signals towards a December move."

Most economists polled by Reuters last month predicted a 6-3 decision by the MPC to leave Bank Rate unchanged.