The pound has reached its highest point since April of the previous year, as the Bank of England seems ready to hike interest rates beyond those of the US Federal Reserve and further than the European Central Bank.
Sterling has surged more than 2% since Monday, marking the largest weekly gain since the beginning of December and making it the top-performing currency among major economies this year.
This development coincides with the Federal Reserve’s decision to halt its consecutive interest rate increases for the first time in 15 months on Wednesday, keeping the rate within the 5% to 5.25% bracket.
On Thursday, the ECB lifted its rates to 3.5%, the steepest since 2001, and President Christine Lagarde announced that another hike in July is “very probable”.
Regardless, she did not provide any further direction, which has contributed to growing confidence that the pound will strengthen as the Bank of England fights inflation. It is anticipated to raise rates to 5.75% by year-end.
Later in the day, the pound received an additional lift as European Central Bank Governing Council member Francois Villeroy de Galhau cautioned against hastily drawing conclusions about the eventual peak of borrowing costs.
He stated, “No one should hurry to a premature conclusion regarding our schedule or our terminal rate. The recent market instability concerning this terminal rate seems somewhat excessive.”
Today, the pound climbed as much as 0.5% to well above $1.28 and rose as much as 0.3% versus the euro, which is currently trading around 85p.
