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The pound sterling rises against the euro amid BoE migration betting, Austrian lockdown

People walk past the Bank of England on October 31, 2021 in London, United Kingdom. REUTERS / Tom Nicholson

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LONDON, Nov 19 (Reuters) – The pound sterling was up against the euro on Friday as economic data fueled bets that the Bank of England will raise interest rates while the euro weakened as Austria announced a new COVID-19 lockdown .

The pound sterling rose 0.3% against the euro to 84.02 pence at 1540 GMT and was set for its best week against the single currency since the UK was first locked in March 2020.

The euro weakened on Friday as Austria became the first country in Western Europe to again impose a full lockdown this fall to tackle a new wave of coronavirus infections, and Germany didn’t rule it out. Continue reading

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Supporting sterling, economic data this week – including UK inflation, jobs and retail sales – bolstered expectations that the BoE is ready to hike rates after surprising the market by putting them on hold at their November policy meeting to keep. Continue reading

Data showed UK retail sales rose 0.8% last month, a bigger increase than expected. [nL8N2SA1A0]

“The GBP has risen sharply against the euro in recent sessions, with UK economic data this week reinforcing the case for a possible BoE rate hike as early as next month,” said Jane Foley, head of FX strategy at Rabobank.

“Coincidentally, news of further COVID restrictions in various Eurozone countries is weighing on growth prospects across the channel,” she added.

The BoE is expected to be the first major central bank since the pandemic began to hike rates to fight inflation, which hit a 10-year high while household energy bills soar. Continue reading

However, chief economist Huw Pill said financial markets shouldn’t assume that the BoE’s first step in tightening policy is to raise rates 15 basis points to 0.25%.

The data, which mitigated some of the BoE’s concerns about the risks of monetary tightening, showed the UK labor market withstood the end of the government’s vacation program. Continue reading

Fear of trade disruption with the European Union also weighs on the pound.

French President Emmanuel Macron on Friday urged the UK to honor its post-Brexit fishing license obligations, adding that the UK was playing on France’s nerves.

Compared to a strengthening dollar, the pound sterling fell 0.2% to $ 1.3471, not far from an 11-month low hit last week.

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Reporting by Joice Alves; Arrangement by Barbara Lewis, Chizu Nomiyama and Mark Heinrich

Our Standards: The Thomson Reuters Trust Principles.

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