Sterling holds near 16-month high vs euro, with budget and BoE in focus
EWU•Sterling edged lower against the euro after reaching a roughly 16-month high, and rose against a weakening dollar. Easing fiscal concerns and expectations of Bank of England rate hikes supported the pound, while the October 28 budget remained a potential downside risk.
1. Pound near recent high
Sterling was down 0.05% at 84.48 pence per euro, after reaching 84.45 pence on Monday, its highest level since June 2025. It rose 0.19% to $1.334 against the dollar as oil prices fell and markets expected geopolitical tensions to remain subdued before the US midterm elections.
2. Rates and budget in focus
ING forex strategist Francesco Pesole said euro-specific risks were unlikely to fade soon and that the Bank of England had signalled it was prepared to raise rates. He said one or two hikes were increasingly likely, while describing market expectations for 100 basis points of hikes by July 2027 as too hawkish. BoE policymaker Megan Greene said an upward revision to the UK growth forecast added to signs that rates were not very restrictive. The October 28 budget was a potential downside risk for sterling; Rabobank noted that sterling net short positions rose for a third consecutive week to their highest since June.
