Sterling hits 2.5-year high against euro

The pound sterling reached its highest level against the euro in over two and a half years on Tuesday, bolstered by expectations that the Bank of England (BoE) will ease interest rates more cautiously than the European Central Bank (ECB).

Sterling rose by 0.3 per cent to 82.50 pence per euro, a peak not seen since April 2022, and also gained against the dollar, trading at $1.2758.

The pound’s strength marks its fourth consecutive week of gains against the euro, supported by robust UK economic growth and persistent inflation in some sectors.

Analysts anticipate that the BoE will adopt a gradual approach to rate cuts, while the ECB is expected to reduce rates further at its upcoming meeting on Thursday and continue easing to bolster the eurozone’s struggling economy.

“Stubbornly high UK services inflation argues for a cautious BOE easing cycle,” noted Elias Haddad, senior markets strategist at Brown Brothers Harriman.

Meanwhile, the euro faces additional pressure due to potential US trade tariffs impacting the eurozone’s export-driven economy, with the UK potentially less affected due to its service-oriented market.

Attribution: Bloomberg

Subediting: M. S. Salama