Sterling roughly unchanged after six-session rally and BoE rate hike

By Stefano Rebaudo

Nov 5 (Reuters) - Sterling was roughly unchanged after a six-session rally against the dollar on Thursday, as the Bank of England raised rates for the first time in over three years but some policymakers indicated the scope of its total tightening could be smaller than markets had been pricing.

The trade-weighted pound rose to its highest level since the Brexit vote 10 years ago at 86.37. While it has traded above its June 2016 level since December 2025, it remains below the roughly 88 seen right before the outcome of the vote.

The Bank of England's Monetary Policy Committee voted 8-1 to raise rates to 4% from 3.75%, with the dissent coming not from a policymaker seeking to keep rates on hold but from one seeking a bigger hike. 

Coming into Thursday's decision, investors and financial markets had been near-certain there would be a rate rise this month. But financial markets ​also priced in three quarter-point rate rises for 2027, more than most economists think is likely.

"This is not the start of an aggressive tightening campaign; ultimately domestic inflation remains relatively well behaved, and there is still slack in the economy," David Rees, chief economist at Schroders, said.

"Nonetheless, even if the BoE makes further hikes, potentially more than one, markets are already pricing in a full hiking cycle of close to 100 basis points," he added.

The pound rose 0.01% to $1.3473 after touching $1.35025 on Wednesday, its highest level since September 15.

The dollar fell to its lowest level in more than a month on Thursday in the aftermath of an overwhelming victory by Democrats in the US midterm elections, which sent oil prices and Treasury yields lower. 

Some analysts underlined that inflationary pressures are still in place, and growth has been more resilient than anticipated.

"This begs the question of whether policy is truly restrictive, while demand for further hikes has been building," Madison Faller, global investment strategist at JP Morgan Private Bank, said.

"But today's move still feels like a measured, credibility-preserving one rather than the start of an aggressive cycle," she added.

The pound was up 0.05% at 83.48 pence per euro after hitting 83.24 pence last week, its highest level since March 2025.

(Reporting by Stefano Rebaudo; Editing by Thomas Derpinghaus, Kirsten Donovan and Joe Bavier)