Sterling set for biggest weekly drop since September
EWU•Sterling was flat at $1.323 on Friday and headed for its biggest weekly decline since September, as rising U.S. yields and hawkish Federal Reserve comments supported the dollar. The pound edged up to 83.55 pence per euro, near its firmest level since May 2025.
1. Dollar strength weighs
Sterling was up 0.05% at $1.323 on Friday but was on track for a fourth consecutive negative session against the dollar. The weekly decline was driven mostly by dollar strength, following hotter-than-expected U.S. inflation data and comments from Federal Reserve policymakers that reinforced expectations of further rate increases.
2. UK rate outlook
UK growth data matched expectations, supporting the Bank of England’s decision to raise rates the previous week; markets assigned about an 85% chance of another increase in December. Nick Rees of Monex said UK inflation data due the following Friday was likely to exceed consensus and could strengthen expectations of a 25-basis-point increase, but said the bank would want to hold rates in 2027 because of growth and fiscal risks. Sterling also edged up to 83.55 pence per euro, around its firmest since May 2025.
