LONDON: Sterling held steady near recent highs on Thursday and was little moved by a Bank of England decision to keep interest rates on hold as expected, with investors preparing for further British negotiations with the European Union over a Brexit deal.
The pound traded at $1.3046, below a more than one-month high of $1.3087 hit earlier this week, and slightly below where it traded before the BoE decision.
Against the euro, sterling was flat at 89.09 pence.
The BoE's Monetary Policy Committee voted 9-0 to leave interest rates at 0.75 percent, a month after tightening policy for only the second time since the 2009 financial crisis.
"The main message is that they are in wait and see mode," Lee Hardman, an analyst at MUFG, said. "They did acknowledge the recent (economic) data has been stronger than expected" but the bank will want to wait until there is some clarity on whether Britain and the EU can agree a trade deal for after Brexit before adjusting policy again, Hardman said.
Most economists are not predicting a further rate rise until after Britain leaves the EU in March 2019.
After the rate decision British government bond futures see-sawed and briefly touched a session low of 121.68, but soon settled back to levels seen before the announcement at 121.78, down around 10 ticks on the day. Gilt yields were little changed.
The exporter-heavy FTSE 100 stock index briefly extended losses after the rate decision, but quickly reversed course, still slightly in the red.
After a big drop in August, sterling has strengthened in recent days on hopes Brussels and London can agree a deal to govern their future trading relationship.
Those gains have been tempered, however, by renewed uncertainty about whether Prime Minister Theresa May can persuade members of her Conservative Party demanding a sharper break with the EU to get behind her Brexit proposals.
The BoE said financial markets had flagged greater Brexit uncertainty since the bank last met in early August.
The pound has lurched on almost every Brexit-related headline in the past week.
Britain will publish more advice to businesses and the public on Thursday about how to cope with the disruption that exiting the EU without a divorce deal would cause.
"Sterling has been pushed around by every bit of Brexit news. My sense is that ahead of the Salzburg (EU leaders') meeting, I wouldn't be surprised to see more positive noises from the EU," said Dean Turner, economist at UBS Wealth Management.
"The key thing to watch is that, if we get a November (EU) summit, which is rumoured at the moment, that should be another positive signal for sterling."
Before Thursday's BoE decision, implied volatility on sterling -- gauges of expected price swings -- took a step back after rising to near seven-month highs on Wednesday.