"The Bank of England is pretty much on hold until there is a clear decision on Brexit and they were less upbeat on their growth and inflation forecasts as well," said Morten Lund, a senior FX strategist at Danske Bank. Against the dollar, the pound floated 0.1% higher at $1.2482 after briefly falling to the day's lows at $1.2448 following the central bank rate decision.
Britain's economy unexpectedly shrank by 0.2% in the three months to June. On Thursday, the BoE said its staff now predicted a small bounceback of 0.2% in the three months to September, compared with the 0.3% it predicted six weeks ago. Newsflow on the Brexit front was also not supportive of the pound.
Britain said on Thursday it had shared documents with Brussels setting out ideas for a Brexit deal, but an EU diplomat described them as a "smokescreen" that would not prevent a disorderly exit on the Oct. 31 divorce date. Derivative markets signalled a pick-up in expectations of swings in the pound in the coming weeks, with one- and two-month volatility gauges spiking higher on Thursday. One-month implied volatility rose to near its highest levels this month at 10.2 vol.