Sterling Rides High Amid Currency Market Shifts

Sterling strengthened against the dollar and euro as traders expect larger Federal Reserve cuts. Political changes in France put pressure on the euro, while investors await U.S. job data. Sterling's sensitivity to fiscal changes is noted, and markets are gearing up for key monetary policy announcements from the Federal Reserve and the Bank of England.

Sterling made gains against both the dollar and the euro on Tuesday, buoyed by increased expectations for a significant interest rate cut by the Federal Reserve in the coming week. Political turmoil in France also contributed to the euro's slide. Sterling rose by 0.3%, marking its strongest position since mid-August.

Investors are keenly awaiting revisions to U.S. job data anticipated later today, which could reveal a weaker jobs market and bolster the case for substantial rate cuts by the Federal Reserve. According to Philip Wee, senior FX strategist at DBS, the Federal Open Market Committee meeting might hint at further cuts this year, while the Bank of England could postpone any cuts until 2026.

The dollar, facing pressure from heightened expectations of a 50-basis point rate cut, hit a near seven-week low against major peers. Meanwhile, euro's decline against sterling was accelerated by the political upheaval surrounding the removal of French Prime Minister Francois Bayrou, even though analysts suggest it may not lead to a fall in the euro. Additionally, fiscal developments in the UK remain a focal point as British finance minister Rachel Reeves plans to unveil the budget on November 26.

(With inputs from agencies.)