LONDON: The British pound climbed against a broadly weak dollar on Wednesday, unruffled by Prime Minister Boris Johnson’s political woes, with attention focused on potential policy signals from the Bank of England (BoE) this week.

Gaining after four days of losses, sterling rose 0.4% to $1.30535, moving away from a low hit last week that marked its lowest level since November 2020. Against the euro, the pound was 0.22% lower at 83.155 pence.

British lawmakers are due to vote on Thursday on whether Johnson should be referred to parliament’s privileges committee for an inquiry into breaches of lockdown rules, after his apology to parliament on Tuesday.

Given the ruling Conservative party’s majority in parliament, the motion is unlikely to pass. That means currency markets are overlooking political uncertainty for now.

“Currencies generally dislike political uncertainty, but if Johnson leaves, it will most likely be a change of personnel rather than a change of policy,” said Colin Asher, senior economist at Mizuho. “In this case the short-term implications for growth and inflation are relatively small and hence the impact on sterling will be limited.”

Instead, the market focus remained on hints on future rate hikes from the BoE, which has recently softened its language on the need for more increases after raising rates three times since December.

Thursday will see key speeches by BoE policymaker Catherine Mann and Governor Andrew Bailey.

“The Bank is expecting the cost-of-living squeeze to do a lot of its work for it, so the Bank is sounding dovish on the need for more rate hikes over the remainder of 2022,” said Mizuho’s Asher.

He added that sterling could recover later in the year as markets scale back the aggressive US rate-hike bets that have bolstered the dollar.

But others noted that risks to the UK economic growth outlook could mean more pain for sterling in the near-term.

Data last week showed British consumer price inflation hit a thirty-year high of 7% in March, and the International Monetary Fund (IMF) on Tuesday forecast slower economic growth and more persistent inflation for Britain compared with other major economies next year.

“Weak growth and the cost-of-living crisis are likely to keep the BoE from hiking by as much as markets expect this year, which risks GBP losses extending well beyond $1.30 over the next few months,” said Scotiabank analysts in a note.