LONDON: Britain’s pound weakened against a rebounding dollar despite expectations that the Bank of England will hike interest rates later on Thursday, a day after the U.S. Federal Reserve delivered its biggest rate hike in 22 years.

It would be the BoE’s fourth consecutive rate hike, the first such run since 1997, and is expected to take the Bank Rate to 1% from 0.75% now. It is already largely factored in by markets.

“It is probably a little too early to look for a hard sell-off in sterling on today’s meeting, but volatility looks assured,” he added in a note.

At 0922 GMT, sterling was down 0.6% at $1.2561, reversing Wednesday’s gains and falling back towards the lowest level since July 2020, hit last week at $1.2412.

Against the euro, the pound fell 0.4% to 84.39 pence.

The pound has weakened in recent weeks on expectations that the BoE may have to slow the pace of tightening as the central bank battles with above-target inflation and a cost-of-living crisis that is signs of weighing on economic activity.

Sterling has also struggled against a soaring dollar, which has been supported by bets of aggressive tightening by the Fed and by its safe-haven appeal, given the growing uncertainty over the economic outlook.

On Wednesday, the Fed raised its benchmark overnight interest rate by half a percentage point.

Sterling traders were also keeping an eye on local elections taking place across the United Kingdom on Thursday, with results expected to filter in overnight and through Friday.

UniCredit analysts expect the focus to be on voting for the Northern Ireland Assembly, as polls predict that Sinn Fein, an Irish nationalist party, is on course to become the largest party for the first time.

Johnson’s Conservative Party is projected to lose more than a third of its local council seats across Britain, an outcome that analysts say would increase pressure on Johnson to quit following a series of scandals linked to the COVID pandemic.