Sterling held steady against the Dollar on Thursday ahead of the upcoming Bank of England meeting where it is forecast to keep rates on hold.

However, uncertainty surrounding what the central bank may say in regard to the monetary policy outlook remains.

A number of central bank decisions were scheduled for this week. On Tuesday, the Bank of Japan concluded its negative interest rates policy and hiked rates for the first time in 17 years. Then, on Wednesday, the US Federal Reserve held its view that rates would likely be cut three times in 2024, according to Reuters reports.

Traders are assigning a strong chance of a possible first Federal Reserve interest rate reduction occurring in June, with the anticipation that rates will conclude the year at approximately 4.50%, a decline from the current range of 5.25-5.50%. In contrast, the Bank of England may not significantly reduce rates before August. 

However, Wednesday's inflation data, indicating a decrease in consumer price pressures, has brought the possibility of a cut in June into consideration, with traders estimating around a 60% probability of such a move.

"Our BOE watch list includes the BOE decision split – will there be anyone voting for a hike? With progress made on wage increases and inflation, there is a chance no one will vote for a hike at this meeting. This could be seen as a step closer to the BOE cutting interest rates," said XTB research director, Kathleen Brooks.

The Pound was unchanged at the time of writing at $1.2788. So far, in March, it has risen 1.3% and has been on track for its largest monthly gain against the greenback since November.

The Euro was trading flat against the Sterling at 85.47 pence after dipping 0.2% so far this month.

Furthermore, the increased probability of UK rates having a higher premium compared to those in other regions has contributed to the Pound's stronger performance against the Dollar this year, surpassing any other G10 currency. 

Indeed, the sterling has risen by 0.5%, topping the runner-up, the Chinese Yuan, which has fallen by 0.2% in value against the dollar this year in the offshore market.