Pound stands tall as dollar, euro wilt
TLT•Sterling rose 0.4% to $1.3429 on Friday, making it the best-performing major currency of the day. Money markets nearly fully priced in a Bank of England rate hike next week, and the pound was heading for a 1% monthly gain against the dollar.
1. Sterling gains
The pound rose 0.4% to $1.3429 on Friday after the government’s budget produced no major surprises and traders anticipated a Bank of England rate hike next week. Sterling was on track for its first monthly gain against the dollar since August.
2. Rate expectations
Money markets were almost fully pricing in a rate increase next week, followed by another in February and a third by July. Traders also priced in a 50% chance of a fourth hike by December 2027.
3. Economic outlook
The article said the British economy had consistently beaten expectations, bond yields were rising and inflation was 3.1%, with forecasts pointing to roughly double the Bank of England’s target. Deutsche Bank chief UK economist Sanjay Raja said the bank’s patience may have run out as energy prices rise and inflation is poised to top 4% year-on-year next year.
