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Sterling hits 20-month high against Euro

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The Pound hit a 20-month high against the Euro on Monday as the governor of the Bank of England indicated again that the bank is preparing to hike interest rates as inflation risks increase.


Sterling has gained 5.5% against the Euro in 2021, with the main factor supporting the currency resting with expectations the BoE will increase rates as the UK economy grapples with an energy crisis, shortage of labour and increasing coronavirus numbers.


Governor Andrew Bailey said during an online panel discussion on Sunday organised by the Group of 30 consultative group, that the central bank will “have to act” in its monetary policy meetings on the risk of medium-term inflation.


He added that the recent surge in inflation would only be temporary, yet the spike in energy prices would drive it up for longer.


In regard to rate hike expectations, short-dated UK government bond yields rose to their highest level since May 2019, Reuters reports, with the two-year gilt yield rising by 16 basis points to hit a high of 0.747%.


The Pound jumped against the Euro overnight to a 20-month high of 84.25. However, it edged down to trade flat at 84.42 pence on Monday morning.


Against the Dollar, it declined 0.2% to $1.3717, not far away from a one-month high on Friday.


“Sterling was the biggest gainer overnight after Bank of England Governor Bailey stated flatly that the British central bank is gearing up to raise interest rates,” according to Marshall Gittler, Head of Investment Research at BDSwiss Holding.


The Bank of England looks set to be the first major central bank to hike interest rates since the start of the crisis. Investors are betting on a rise to 0.25% by December.


Investors are awaiting UK CPI inflation data for September which is due to be published on Wednesday.

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About

deVere Group – Foreign Exchange’s Public Relations Department deals with all areas of the media and external communications including international, national, regional, local, trade, consumer, print, broadcast, social and online. The Department aims to provide a helpful service to journalists, broadcasters and editors, amongst others, and reply to all media enquiries, including urgent enquiries out of hours, within agreed deadlines.

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Our press office does not have access to client details and will not be able to assist with individual client enquiries. Please contact deVere Group – Foreign Exchange’s Head of Public Relations on [email protected] or call +44 2071220925.