GBP jumped across the board yesterday and continued its bullish run, topping out at a massive 20 month high of 1.19 against EUR. Sterling also further strengthened against USD over the course of the trading session, moving over 0.5% from 1.3755 to 1.3830 at around midday.
Yesterday’s movements were primarily driven by interest rate sentiment. GBP has benefited from rising market expectations of an interest rate hike from the Bank of England, for which some analysts are forecasting that a rate rise could come as early as 4th November. This places the UK, and in turn GBP ahead of the curve against EUR, with the ECB not expected to raise rates until 2024. The ECB has currently set targets to maintain an inflation level of 2% for at least 18 months before they consider a hike.
The UK’s outlook is looking bright at the moment with 10-year bond yields continuing to grow to 29-month highs, boosting demand for GBP. Covid-19 cases are also trending below expectations, easing the Bank of England’s concerns for the coming winter and feeding into the positive sentiment for an impending rate hike.
Have a good day.
James Camp, Senior Relationship Manager.
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