Sterling hits two-year high on Thursday

The pound sterling surged to its highest level in over two years against the dollar on Thursday, reaching $1.33 for the first time since March 2022.

This boost followed the Bank of England’s (BOE) decision to keep interest rates steady at 5 per cent and its commitment to a gradual approach to easing policy.

Sterling strengthened by up to 0.8 per cent as investors adjusted expectations for future rate cuts. Money markets now anticipate 42 basis points of easing through December, slightly less than the 50 basis points expected before the BOE’s announcement.

Jordan Rochester of Mizuho International predicts that sterling will continue to perform well against the dollar, with a potential rise above $1.34 by early October and $1.40 by the end of 2024.

Despite expectations of further rate cuts in November, persistent inflation is expected to keep UK borrowing rates relatively high compared to other major currencies.