Sterling fell along with most other currencies against the dollar on Wednesday, as wage and jobs data that beat forecasts failed to offset threats to the economy from Britain's 2016 budget and coming Brexit referendum. The impact of more spending cuts and poorer growth expected from the budget looks largely priced in, dealers and analysts said. But a poll on Tuesday showed voters who favour leaving the European Union leading those who want Britain to remain a member.
The pound retreated as a result, giving up some of the ground it gained last week. It fell 0.3 percent on the day on Wednesday to $1.41, having hit a two-week low of $1.4085 early in the London trading session. The euro was up 0.15 percent at 78.63 pence.
"The budget is likely to suggest there is going to be continued tight fiscal policy, which at the margins means that monetary policy will be accommodative for longer," said Sam Lynton-Brown, a strategist at BNP Paribas in London. "But I think a lot of that is in the price."
He said that there was some speculation in the market that Thursday's Bank of England meeting could even see some symbolic votes for a cut in interest rates within the nine-member panel.
Money market rates, while skewed by the bank's quantitative easing, do suggest a cut in rates over the next year is net more likely than a rise. But few analysts are actively arguing for that.
"We don't expect a BoE bombshell, but there are dovish risks, making sterling a better short," said Citi strategist Josh O'Byrne.
"Data has been disappointing in the past month, we've priced out most cut risk but there are no hikes before 2019. The bank could serve a reminder policy isn't ready to become a sterling positive."