Sterling strengthened against both the Dollar and the Euro on Monday as investors prepared for a crucial week of central bank decisions, with the US Federal Reserve expected to cut rates while the Bank of England is likely to keep policy unchanged.
The Pound climbed to its highest level versus the Dollar since early July before easing slightly, last trading at $1.3583. Against the Euro, it rose 0.2% to 86.33 pence, staying within its recent range.
Investors are eyeing this week’s major rate decisions in the US, Japan, Britain, Canada, and Norway, with the Federal Reserve’s Wednesday decision in the spotlight, Reuters news agency reports.
The Fed is widely expected to cut rates by 25 basis points, while the Bank of England is likely to keep its key interest rate unchanged and signal a slower pace of government bond reductions.
Commentary from the Bank of England’s policy decision is unlikely to move Sterling significantly, as focus remains on Britain’s autumn budget.
Chancellor Rachel Reeves is set to present her annual budget on 26th November. With UK public finances under pressure, analysts expect Reeves will need to raise at least £20 billion in taxes, and potentially double that, to stay on track with her fiscal targets.
Elsewhere, the Dollar slipped slightly against a basket of currencies, and the upcoming Fed rate cut could drive further declines.
The Dollar has already dropped nearly 10% this year against major peers.
Factors such as the US economy’s reduced outperformance globally and lower hedging costs for US Dollar assets in Asia may contribute to continued Dollar weakness.
In addition, the Euro declined against the Dollar and Japanese Yen on Monday following Fitch’s downgrade of France’s credit rating late last week.
The single currency traded slightly lower at $1.1725 and fell about 0.2% versus the Yen.