The British pound hovered near a seven-month low on Thursday as investors braced for the Bank of England’s (BoE) closely watched interest rate decision. With markets pricing in roughly a one-in-three chance of a rate cut, sentiment remains cautious.

Sterling edged up 0.1% to $1.3066 ahead of the BoE’s 1200 GMT announcement, after falling to $1.3011 on Wednesday—its weakest level since April. Against the euro, the pound slipped to trade at 88.14 pence per euro, close to its weakest level since May 2023.

Expectations of a potential rate cut have intensified in recent weeks, especially after UK Finance Minister Rachel Reeves signaled upcoming tax increases in her November 26 budget. Reeves highlighted the need to avoid austerity while reducing public debt, describing the fiscal plan as one of “hard choices.”

Once widely expected to maintain rates at 4.0%, the BoE’s Monetary Policy Committee (MPC) decision now appears more finely balanced. Persistent inflation and easing labor market pressures were cited by Governor Andrew Bailey as reasons to remain cautious. Last week, Goldman Sachs revised its forecast and now expects the BoE to cut rates.

Francesco Pesole, an FX strategist at ING, noted that while speculation of a pre-budget rate cut has grown, the central bank could still opt to hold rates pending clearer economic signals.