LONDON: Sterling firmed against the dollar on Monday and briefly hit 23-month highs against the euro at the start of a week where the Bank of England is expected to raise interest rates for the second time in as many months.
The currency benefited from the greenback’s broad retreat but it gave up earlier strong gains against the euro, which jumped 0.6% on the day against the dollar.
The pound mostly shrugged off news that an inquiry by civil servant Sue Gray into lockdown parties at Prime Minister Boris Johnson’s office and residence had condemned some of the behaviour in government as being “difficult to justify.”
By 1600 GMT, the pound was up 0.2% versus the dollar at $1.3419 but eased 0.3% to the euro at 83.520 after hitting 83.05 pence, its highest level since mid-February 2020 .
The British currency is set to end January with a loss against the dollar, which has benefited from the rapid ramping up of Fed rate hike bets.
Against the euro it is up 0.7% this month, partly erasing some earlier gains as markets also price euro zone interest rate hikes for end-2022.
Most economists polled by Reuters expect the BoE PREVIEW-Bank of England on track for second rate rise in under two monthsto raise rates to 0.5% on Feb. 3 from 0.25%. If the bank does that, it would also stop reinvesting maturing gilts and start to reduce its 875 billion-pound government bond holdings.
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