On Monday during Asian trading hours, the pound rose to a seven-month high versus the dollar thanks to economic data that showed the British economy was doing better than anticipated and raised anticipation for further interest rate increases.
Early on Monday, the pound reached $1.24475, its highest price since June 10, 2022. Due to the Lunar New Year vacations in important financial centers like Hong Kong and Singapore, moves were made much more difficult by low liquidity.
The euro increased 0.26% to 87.83 pence, while the British pound was last trading flat on the day at $1.2470.
Chris Turner, the global head of markets at ING, wrote in a note to clients on Monday that sterling “continues to perform well and is holding onto the gains earned last week on the strength of high wage and core CPI figures.”
“BoE predictions have firmed up, strengthening sterling to match the strength of the euro this year.”
A 50 basis point rate increase at the Bank of England’s February meeting has a 70% possibility, according to market predictions. Refintiv data shows that a 25 basis point increase is already completely priced in.
After reaching a 41-year high in October, data released on Wednesday revealed that British inflation dropped to 10.5% last month. But authorities have cautioned that a tight labor market will continue to push inflation upward.
The core CPI, which does not include energy, food, alcohol, or cigarettes and is seen by some economists as a more accurate indicator of underlying inflation trends, remained steady at 6.3%.