The British pound has reached its highest value in three months against the euro, following a downturn in Germany’s construction and manufacturing sectors.
The euro fell to a low of 85.54p against the pound, a decrease of 0.2%, marking its weakest point since early September, before slightly recovering to a 0.1% decline for the day.
This shift occurred in the wake of unexpected contractions in German factory orders for October and a significant downturn in its construction sector, as reported by private sector data.
Additionally, market speculation is growing that the European Central Bank will implement substantial interest rate cuts next year, with expectations of a 1.5 percentage point reduction by 2024.
In contrast, the Bank of England has signalled its intention to maintain interest rates at 5.25%, the highest in over 15 years, for an extended period to combat inflation, currently at 4.6%.
The pound also maintained stability against the US dollar, trading at $1.26, closely following its near four-month peak of $1.2733 last week.
Jane Foley, Rabobank’s head of FX strategy, noted, “The market is thinking that the ECB could be cutting rates first, followed by the Fed and then the Bank of England.”
