Sterling sentiment held firm ahead of BOE, EUR/GBP found support at the 0.8500 level [Video]

The final UK PMI services-sector index for July was revised up to 59.6 from the flash reading of 57.8. There were further important supply-side issues, especially with staff shortages while there was further upward pressure on wages. Input prices increased at the fastest rate for 25 years and charges also increased at the fastest rate on record. The Bank of England will be monitoring inflation trends closely, especially if there is evidence that higher inflation pressures are not transitory.

Sterling held gains into the New York open as GBP/USD held above the 1.3900 level while EUR/GBP again tested the key 0.8500 area.

There was a retreat against the dollar with a fresh GBP/USD test of 1.3900, although the Euro was unable to sustain a recovery.

The Bank of England will announce its policy decision on Thursday with principal attention likely to be on the asset-purchase vote with the potential for a split on the committee. Growth and inflation forecasts will also be important for the UK currency. Sterling was unable to make headway in early Europe on Thursday as GBP/USD traded just below 1.3900 while EUR/GBP settled close to 0.8520. Markets were braced for choppy trading following the Bank of England policy decision.