Picture used for illustrative purpose. File

Sterling edged slightly higher on Thursday ahead of an eventful day with Chancellor Rishi Sunak expected to unveil a new set of measures to support the COVID-hit economy.

Sunak, who announced on Wednesday that the budget has been cancelled, is expected to announce a lifeline to some furloughed workers in a speech around 1045 GMT.

Versus the dollar, sterling was up 0.1% at $1.2733, having hit a two-month low of $1.2676 on Wednesday. Against the euro, the pound was flat at 91.53 pence.

Investors expect more stimulus but "if he (Sunak) disappoints you may see a reaction on UK markets," said Justin Onuekwusi, portfolio manager at Legal & General Investment Management. 

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"The picture is similar to the U.S. where we are talking of the need for more fiscal stimulus."

Investors were also looking for hints whether the Bank of England intends to cut interest rates below zero.

"With BoE governor Andrew Bailey also due to speak again later today, it could well be another choppy day for the pound, with the concern about negative rates still fresh in the market's memory," wrote Michael Hewson, chief market analyst at CMC Markets UK.

But supporting sterling, hopes returned that the European Union and Britain will reach a Brexit trade agreement by the end of a transition period in December after two of the most powerful players in the negotiations said they were determined to strike a deal.

Reuters