LONDON, Sept 25 Reuters The pound slipped against the dollar on Wednesday, retreating from a twoandahalfyear peak a day earlier, as investors turn their focus to next month39;s British budget and the Bank of England39;s interest rate decision due eight days afterwards.

Sterling fell 0.30 to 1.33725, marking a break after five consecutive days of gains.

I think sterling is perhaps facing quite a difficult hurdle in the shape of the October 30th UK budget, said Jane Foley, senior forex strategist at Rabobank, as there is a clear anticipation that the country will face more tax hikes.

It does feel that investor sentiment has perhaps become more worried about the possibility of tax hikes in this budget.

Uncertainty about the policy direction of Britain39;s newly elected Labour government might be holding back business investment and consumer spending, Bank of England Monetary Policy Committee member Megan Greene said on Wednesday.

Finance minister Rachel Reeves has said some taxes are likely to rise when she sets out her first budget on Oct. 30.

The BoE last week held rates and said it would be cautious about future rate cuts. Markets expect just 40 bps more of cuts by December, which would leave the base rate closer to 4.50.

Analysts at Unicredit said in a note to clients that they remained bearish towards sterling ahead of what they said was likely to be a more intense easing process by the BoE especially next year, to cope with a furtherdeteriorating UK economy…