Sterling rose in European trade on Wednesday against a basket of major rivals, and held its ground above four-week lows against the dollar, on active short-covering as the US dollar tapers off.

The divisions within the Bank of England on the future path of policy easing hurt the odds of a rate cut this week, with traders now awaiting fresh UK inflation data later today to gather more clues.

The Price

The GBP/USD price rose 0.15% to $1.3447, with a session-low at $1.3421.

The pound lost 1.1% on Tuesday against the dollar, the second loss in three days, and the heftiest since April 25 on strong haven demand on the dollar.

US Dollar

The dollar index fell over 0.15% on Wednesday away from a one-week high against a basket of major rivals.

It fell on profit-taking while investors shun new positions before the Feds policy decisions later today.

The Fed is widely expected to maintain rates unchanged at 4.5% for the fourth straight meeting, and will likely provide clues on the future path of monetary policies this year.

UK Rates

The latest Bank of Englands policy meeting in May showed a clear division between members on policy.

The BOE will meet this week to discuss latest developments, especially as the UK government reached milestone trade deals with both the US and the EU.

The current odds of a BOE 0.25% interest rate cut this week stood at below 30%.

Now investors await crucial UK inflation data to gather additional clues, with consumer prices expected up 3.3% y/y in May, down from 3.5% in April, while core prices are expected up 3.5% last month.