The British pound remained close to a 16-month high against the euro on Tuesday as investors weighed expectations of higher interest rates against uncertainty surrounding the United Kingdom’s upcoming budget.
Sterling traded at $1.334, up 0.19 per cent against the US dollar, while slipping 0.05 per cent against the euro to 84.48 pence. The pound had reached 84.45 pence against the euro on Monday, its strongest level since June 2025.
Market expectations that the Bank of England could raise interest rates have supported the currency. Investors are also responding to concerns about the eurozone’s economic outlook, particularly France’s public finances and political uncertainty.
The International Monetary Fund’s decision to raise its forecast for UK economic growth in 2026 has provided further support for sterling. However, the currency’s recent gains could face pressure as investors assess the government’s fiscal plans.
Chancellor John Healey is due to present the UK budget on October 28. Investors will be watching for measures to control public borrowing and manage government spending without undermining economic growth.
Bank of England Governor Andrew Bailey has also stressed the importance of restoring confidence in public finances, adding to scrutiny of the government’s budget decisions.
Meanwhile, market positioning suggests investors remain cautious about sterling despite its recent strength. A disappointing budget or weaker economic outlook could reverse some of the currency’s gains.
Leave a comment