Sterling fell against the dollar on Thursday as traders awaited the Bank of England’s (BoE) latest decision and the Federal Reserve raised interest rates once more.

After Fed Chair Jerome Powell indicated that interest rates would likely need to rise more than anticipated to contain inflation, the dollar strengthened in tandem with bond yields in the United States.

Traders sold sterling in anticipation that the BoE would adopt a more restrained tone than the Fed, which contributed to the dollar’s rise against the pound.

Sterling fell 1.26 percent to $1.1247 in London morning trading, its lowest level since Oct. 21.Additionally, the euro strengthened against the pound, rising 0.42 percent to 86.54 pence.

On Wednesday, the Federal Reserve raised interest rates by 75 basis points (bps) for the fourth time in a row, bringing the target range to 3.75 percent to 4%.

The Bank of England was widely anticipated to increase borrowing costs by 75 basis points (bps) to 3% later on Thursday (1200 GMT).However, given that the BoE is dealing with a weak economy and a lack of clarity regarding fiscal policy, some analysts suggested that a smaller 50 bps increase was only a remote possibility.

In a note to clients, MUFG currency analyst Lee Hardman stated, “We expect the BoE to signal that a larger hike today is unlikely to be the first of a series of larger hikes.”It ought to promote a weaker pound.”

The uncertainty surrounding the BoE decision has increased as a result of Rishi Sunak, the new prime minister, postponing the government’s fiscal statement until November 17.It is anticipated that the government will announce tax increases and spending reductions, which could further impede growth.

According to senior trader Michael Quinn at Monex Europe, bets that the BoE will struggle to raise rates as high as the Fed were the primary factor in the sterling’s decline.The expectation of higher rates typically boosts a nation’s currency by making investments appear more appealing.

The narrative is clearly shifting from central bank policy divergence to pivoting.The basics in the U.S. are absolutely more strong and solid than in Europe,” he said. “Sterling’s future looks pretty bleak at the moment.”

On Wednesday, Powell gave the impression that the Fed might reduce the rate at which it raises borrowing costs, leaving room for a 50 bps increase in December.However, he also stated that the rate peak was likely to be higher than traders anticipate.

The dollar index rose 0.78 percent to 113.01, a two-week high.

Traders believe that the BoE will almost certainly raise rates in December by a lower 50 basis points, as indicated by futures market pricing.However, they believe there is a 58% chance that the Fed will decide on another 75 bps hike.