Sterling rises vs euro amid BoE hikes bets, Austria new lockdown

Supporting sterling, economic data this week - including UK inflation, job and retail sales numbers - had bolstered expectations the BoE is ready to raise interest rates, after Governor Andrew Bailey surprised the market by keeping them on hold at its November policy meeting. On Friday, official data showed British retail sales rose by 0.8% last month, a bigger rise than expected.

Sterling rose versus the euro on Friday, after retail sales data fuelled bets the Bank of England will raise interest rates, while the euro weakened with Austria announcing a new lockdown. The sterling was 0.3% higher versus the euro at 83.98 pence at 1230 GMT and was set for its best week against the single currency since Britain's first lockdown in March 2020.

The euro weakened on Friday as Austria became the first country in western Europe to reimpose a full coronavirus lockdown this autumn to tackle a new wave of infections, and Germany did not rule out doing the same. Supporting sterling, economic data this week - including UK inflation, job, and retail sales numbers - had bolstered expectations the BoE is ready to raise interest rates after Governor Andrew Bailey surprised the market by keeping them on hold at its November policy meeting.

On Friday, official data showed British retail sales rose by 0.8% last month, a bigger rise than expected. "GBP has taken a lot of ground versus the euro in recent sessions with this week’s UK economic data strengthening the case for a potential rate rise from the BoE as soon as next month," said Jane Foley, head of FX strategy at Rabobank.

"Coincidentally, news of further COVID restrictions in various euro zone countries is weighing on the outlook for growth on the other side of the Channel," she added. The BoE is expected to become the first major central bank to raise rates since the start of the pandemic in a bid to tackle inflation that hit a 10-year high as household energy bills rocket.

Easing some of the BoE's concerns about the risks of tightening monetary policy, data showed Britain's job market withstood the end of the government's furlough scheme. Capping sterling's rise, worries have mounted that disagreements between Britain and the European Union could trigger trade disruptions, hitting the British economy, which is already lagging other rich nations.

Britain left the EU last year but has put off implementing some of the border checks between its province of Northern Ireland and EU member Ireland that the bloc says are required under their divorce deal. Versus a strengthening dollar, sterling fell 0.4% to $1.3449, not far from an 11-month low touched last week.

 

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)