Sterling on track for best week of year against ailing euro

LONDON: Sterling was on track for its biggest weekly gain against the euro in nearly seven months on Friday, as investor concerns sparked by France’s snap election continued to pummel the euro zone currency.

The euro was broadly flat on the day against sterling at 84.09 pence, but was on course for a nearly 1% weekly fall - its biggest since November 2023.

The pound slipped 0.4% on the day against the broadly stronger dollar, to $1.27065.

The euro has tumbled across the board this week as opinion polls project that Marine Le Pen’s far right National Rally (RN) party is on track to come out top in the French elections.

Markets appear to be taking Britain’s own general election largely in their stride so far, with the opposition Labour party currently projected to win comfortably next month.

Labour has tacked to the centre ground in recent years which has helped reassure businesses, although some of their policies have unnerved the super-rich.

The Bank of England (BoE) is set to meet on June 20 to determine its monetary policy, with markets betting the central bank will hold the benchmark interest rate at 5.25%, despite the European Central Bank cutting earlier this month.

Market pricing suggests a 91% chance that the BoE will hold, with a 9% chance of a reduction.

While headline UK inflation has fallen close to the BoE’s 2% target, it was much higher than expected in the key services sector in April, and 6% wage growth in May remained roughly double the level consistent with the target. “While the data has done most of the heavy lifting in taking a June cut off the table, the proximity of the June meeting to the election date probably reduces the chance of the BoE cutting a little further,” economists at BNP Paribas said in a note.