Sterling at strongest in over a month versus euro after GDP revision reinforces BoE hike bets
EWU•Sterling reached a six-week high against the euro after UK second-quarter growth was revised up to 0.5% from 0.4%. Markets priced in around 33 basis points of Bank of England rate hikes by year-end.
1. Growth lifts sterling
Sterling rose 0.4% to $1.3292, a one-week high, and reached its strongest level against the euro since mid-August. The euro fell nearly 0.3% to 85.43 pence. UK economic output grew 0.5% in the second quarter, up from an initial estimate of 0.4%.
2. Rate expectations and budget
Markets priced in around 33 basis points of Bank of England tightening by year-end and more than 100 basis points by the end of 2027, although analysts broadly expected more limited action. Sterling was set for its biggest monthly loss in nearly a year against the dollar, while it was on track for small monthly and quarterly gains against the euro. Prime Minister Andy Burnham’s government is due to unveil a budget in October.
