Sterling under pressure as BoE week arrives

LONDON, Nov 3 (Reuters) - The pound remained under pressure against both the dollar and euro on Monday as traders tried to fine-tune their positions ahead of Thursday's in-the-balance Bank of England meeting.

Sterling was down 0.27% on the dollar at $1.3132, just above last week's more than six-month low of $1.30965.

It was steady versus the euro at 87.70 pence, but again wasn't far from last week's 88.17 pence to the common currency, the pound's softest in over two years.

Monday data showing British factories had their strongest month in a year in October did little for sterling, in part because the recovery was driven by one-off factors.

Instead, the week's focus is the BoE meeting - unusual among October and November's developed market central bank meetings in that there is reasonable uncertainty heading into it.

Market pricing currently reflects around a one-in-three chance of a 25-basis-point rate cut, having risen from close to zero after a raft of economic data last month, most notably a cooler-than-expected inflation print.

Pricing reflects a roughly two-in-three chance of a cut at either next week's or December's meeting.

"Our base case is still a cut in December - I don't think one softer CPI print is enough and by December they'll have more information and have the budget - though it wouldn't be a huge surprise if they cut this week," said Lee Hardman, senior currency analyst at MUFG.

British finance minister Rachel Reeves will announce her much-discussed budget in late November.

And the uncertainty around Thursday's meeting means a sharp swing in the pound either way on the decision is likely, at least relative to other central bank meetings. Last week's well telegraphed hold by the European Central Bank did very little to the euro.

Moves may not last, however.

'If they do stay on hold, we might get an initial rally in the pound, but I think it will peter out as people start thinking about December," said Hardman.

(Editing by Mark Heinrich)