There was little change for Sterling on Thursday ahead of the Bank of England’s (BoE) rate decision, where it is forecast to hold rates at 5.25%, a 16-year top.

UK inflation declined to 2%, according to data published on Wednesday, reaching the BoE’s target for the first time since 2021.

However, persistent inflation in services is causing investors to anticipate that the bank's monetary policy committee (MPC) will maintain interest rates until August or September.

This move could prevent Prime Minister Rishi Sunak from receiving a boost before the national election scheduled for 4th July, Reuters reports.

The Pound edged down slightly at the time of writing to $1.2712 but is up from last Friday’s one-month low of $1.2658.

Over the past two weeks, fluctuations in the Euro and Dollar have impacted the value of the Pound as investors processed news of softer US inflation figures and French President Emmanuel Macron's announcement of snap elections.

The single currency was down slightly against the Sterling on Thursday at 84.42 pence yet fell to a two-year low against the Pound on Friday as markets were rocked by Macron’s decision.

Traders believe the Bank of England will likely begin reducing rates at the meeting in September, although there is a chance of a cut in August, as per money market pricing.

“The probability of the BoE cutting rates as soon as the August MPC meeting has fallen from around 50-50 to less than one-in-three after the UK CPI (inflation) report revealed that services inflation is continuing to prove more sticky than expected,” stated Lee Hardman, MUFG currency analyst.

Inflation for services stood at 5.7% in May, a fall from 5.9% in April yet remaining above the BoE’s forecast of a 5.3% figure.

Sterling could decline if policymakers adopt a dovish stance during Thursday’s statement, Hardman added.