The British pound hovered near a one-week low against the dollar on Thursday as the market temporarily shifted its focus from next month's parliamentary election to a Bank of England policy meeting.
With early elections on December 12 and the Brexit due on January 31, the Bank of England is expected to keep its key interest rate unchanged at 0.75% and give no explicit guidance on the direction in which interest rates are headed.
"One of the problems faced by the Bank of England is that you have bilateral events to come - elections and Brexit," said Bernberg senior economist Callum Pickering. "So, from the standpoint of pure politics, the Bank of England does not anticipate these events."
The pound briefly fell to a one-week low of $ 1.2837 before settling around $ 1.2865.
Economists are increasingly believing that the Bank of England will cut interest rates at some point next year as the economy slows and uncertainty about Brexit. Financial markets are priced at a 55% chance of a 0.25 percentage point reduction in 2020.
Deutsche Bank economists say they no longer expect a rate hike next year and instead see an increased risk of rate cuts when the Bank of England delivers the January inflation report - the final meeting of US central bank governor Mark Carney.
