Sterling was set to end a six-day losing run on Thursday as the Dollar’s rally paused, yet remained on course to register a 4% fall this month as markets reduced peak rate forecasts for the Bank of England.

When writing, the Pound rose 0.5% against the Dollar at $1.2201 after declining over 2% during the last six trading days. This represents the largest drop in that timeframe since July, Reuters reports.

In addition, the Sterling gained 0.2% to 86.36 pence per Euro after falling to its weakest point in four months earlier in the week.

Last week, the Bank of England left interest rates the same, deciding against increasing the bank rate for the first time since December 2021, amid signals the economy is slowing down and inflation is starting to move down towards the 2% goal.

“The unchanged decision and the lack of hawkish guidance shows they are more firmly closing the door to further rate hikes,” stated Kirstine Kundby-Nielsen, analyst at Danske Bank.

“The tail risk that they were going to hike more had been supporting the Pound, but removing that tail has been detrimental to Sterling,” Kundby-Nielsen went on to say.

As it stands, money markets are pricing in one further rate rise from the Bank of England to take the bank rate to 5.5%. Yet this is still short of prior market forecasts for a peak of over 6%, the Reuters report continues.

On Wednesday, Sterling fell to a six-month low of $1.2111 following a 3.8% fall so far in September, on course for its largest monthly decline against the greenback in a year.

According to analysts, Sterling may move upwards in the near term.

“It might be time for a short-term rebound or at least some consolidation at current levels given the extreme oversold conditions,” according to Convera currency analysts George Vessey and Boris Kovacevic.

“We do feel the Pound is overdue some relief,” they added, stating that $1.23 may be a likely upside target.