The pound was set for its biggest weekly gain against the dollar in nearly four months on Friday and held close to its near four-year high hit the previous day, though that was more due to dollar weakness than sterling strength.
The pound was last up 0.14% on the dollar at $1.13745, just off Thursday’s top of $1.37701, the highest since late 2021.
It was broadly steady on the euro, at 85.24 pence, underlining the fact that the move in the pound against the dollar – referred to as cable by financial markets – has much more to do with the dollar.
“The gains in cable reflect mostly this year’s weakness in the dollar and the strength of the euro, which has dragged the pound higher due to the limited parameters of the EUR/GBP trading range,” Rabobank analysts said in a note.
The pound has gained 2.2% against the dollar this week, its most since early March, as the greenback’s short-lived gains during the Israel-Iran conflict fade. [FRX/]
The main domestic support for the pound this year has come from the Bank of England being slower to cut interest rates than peers, particularly the European Central Bank, as inflation remains sticky.
“Core inflation in the UK has basically stopped moving for the past year – hard to say why. BoE officials are quite concerned. That makes it difficult to cut rates and also the economic outlook is not improving,” Michael Pfister, FX analyst at Commerzbank, said.
Analysts also said they were watching this week’s political drama given what Rabobank described as “the overhang of a very large debt/GDP ratio and a UK current account deficit.”
Prime Minister Keir Starmer this week sharply scaled back planned welfare cuts after more than 100 of his Labour Party lawmakers publicly opposed the reforms, which sought to shave 5 billion pounds ($6.9 billion) per year off a rapidly rising welfare bill.
(Reporting by Alun John and Lucy Raitano）
