© Reuters. Pound and U.S. dollar banknotes are seen in this illustration taken January 6, 2020. REUTERS/Dado Ruvic/Illustration/ File Photo
By Amanda Cooper
LONDON (Reuters) – The pound held steady against the dollar on Friday but closed in on a seventh straight week of gains versus the euro as investors grow more convinced by the Bank of England’s determination to keep interest rates where they are for now.
BoE policymaker Jonathan Haskel, who voted to raise interest rates last week, said he is encouraged by signs that Britain’s inflation pressures might be on the wane but he would need more evidence of a cool-down before changing his stance.
“I’m not going to apologise for banging on about persistence because I think we’re right to,” Haskel told Reuters.
Next week brings a raft of key UK data, including consumer inflation and economic growth, all of which have the power to influence the rate outlook.
was last down 0.1% against the dollar at $1.261 and narrowly in positive territory against the euro at 85.38 pence. The pound is on track for a modest gain this week, bringing its rally against the euro to seven consecutive weeks, the longest such stretch since mid-2021.
“The sterling market definitely has its own thing going on right now and next week is going to be absolutely critical,” Kathleen Brooks, research director for broker XTB, said.
“The Bank of England, with its cries for time last week, wants to see more evidence. That means that the inflation report and the labour market report as well, are two things that are going to generate a huge amount of volatility and I think that will play out a lot in sterling,” she said.
The pound has lost around 1% in value against the dollar so far this year, but is still the best-performer among the G10 universe of major currencies.
Worst off is the yen, with a loss of 6%, followed by the Norwegian crown, which has fallen 4.5%.
has rallied broadly since the start of the year as data underscores the resilience of the U.S. economy and, as a result, the ebbing need for the Federal Reserve to cut interest rates, which would diminish the currency’s appeal.
The interest rate outlook is one of the driving forces behind the pound too. Against the euro, it’s gained 1.5% in 2024 and risen 5.4% against the yen.
In fact, on a trade-weighted basis, the pound is around its highest since May 2022 and heading for its biggest three-month gain since mid-2019, having risen 5.2% in that time.
Futures markets show traders are banking on three rate cuts from the BoE this year, compared with four cuts just last week.
