Barclays analysts told clients on Sunday that "another hike from the BoE should be supportive for GBP". Goldman Sachs on Friday said it was now "constructive" on the pound. "We think that the same factors that acted as headwinds on Sterling in 2022 - mostly natural gas prices and the relative stance of BoE policy - have turned to tailwinds," its analysts wrote. However, Deutsche Bank strategist Shreyas Gopal took a contrary view in a note on Wednesday, saying the rally had likely run out of steam. "Having been bullish on the pound since the start of the year, we no longer think the pound presents attractive risk-reward in the short term," Gopal wrote. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Sterling ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Harry Robertson; Editing by Angus MacSwan)
By Harry Robertson
LONDON, (Reuters) - The pound rose to a five-month high
against the euro on Wednesday as traders bet a rate hike from
the Bank of England on Thursday will not be the last.
The euro fell to 86.73 pence earlier in the
session, the lowest since Dec. 15. It was last little changed at
86.84 pence.
Against the dollar, the pound was last down very slightly at
$1.262, just below the one-year high of $1.267 reached on
Monday.
Sterling has rallied around 22% since tumbling to a record
low of $1.0327 in September, including a 4.6% rally this year.
It remains around 17% below its level 10 years ago, however.
A better-than-expected - although still lacklustre -
economic performance has supported sterling, as has a relatively
sharp fall in the dollar as U.S. inflation has cooled.
Expectations that the Bank of England will have to keep
raising interest rates to bring down stubborn inflation have
also boosted the pound.
The BoE is expected to hike rates by 25 basis points
tomorrow to 4.5%, the highest level since 2008. Pricing in
derivatives markets shows that traders expect rates to peak at
more than 4.8% in September.
Investment banks have become more upbeat about the pound in
recent weeks as the currency has rallied.
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