# Sterling hits five-month high against euro before BoE decision Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-05-10 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Sterling hits five-month high against euro before BoE decision Meta Description: The pound rose to a five-month high against the euro on Wednesday ahead of the Bank of England's rate hike decision. Stay updated with Reuters for the URL: https://financedigest.com/sterling-hits-five-month-high-against-euro-before-boe-decisionhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-05-10t110825z1lynxmpej490fqrtroptp4britain-sterling-1736814038473-compressed.jpg) By Harry Robertson LONDON, (Reuters) – The pound rose to a five-month high against the euro on Wednesday as traders bet a rate hike from the Bank of England on Thursday will not be the last. The euro fell to 86.73 pence earlier in the session, the lowest since Dec. 15. It was last [little changed](https://www.financedigest.com/sterling-little-changed-after-mixed-labour-market-data.html "Sterling little changed after mixed labour market data") at 86.84 pence. Against the dollar, the pound was last down very slightly at $1.262, just below the one-year high of $1.267 reached on Monday. Sterling has [rallied around 22% since tumbling to a record](https://www.financedigest.com/european-stocks-extend-record-rally-on-lift-from-insurers-ma-activity.html "European stocks extend record rally on lift from insurers, M&A activity") low of $1.0327 in September, including a 4.6% rally this year. It remains around [17% below its level 10 years](https://www.financedigest.com/tods-sales-rise-17-in-first-half-of-year.html "Tod’s sales rise 17% in first half of year") ago, however. A better-than-expected – although still lacklustre – economic performance has supported sterling, as has a relatively sharp [fall in the dollar](https://www.financedigest.com/u-s-dollar-falls-as-euro-climbs-in-risky-fx-rout.html "U.S. dollar falls as euro climbs in risky FX rout") as U.S. [inflation has cooled](https://www.financedigest.com/uks-hot-labour-market-cools-and-inflation-eats-pay.html "UK’s hot labour market cools and inflation eats pay"). Expectations that the [Bank of England will have to keep](https://www.financedigest.com/the-stem-cell-banking-market-to-keep-up-the-digitized-momentum.html "The Stem Cell Banking Market to keep up the digitized momentum") raising interest rates to bring down stubborn inflation have also boosted the pound. ![Euro falls to five month low against pound](https://www.globalbankingandfinance.com/wp-content/uploads/2023/05/Screenshot-2023-05-10-102001.jpg) The BoE is expected to [hike rates](https://www.financedigest.com/uk-economy-almost-flat-lined-in-october-adding-to-rate-hike-doubts.html "UK economy almost flat-lined in October, adding to rate hike doubts") by 25 basis points tomorrow to 4.5%, the highest level since 2008. Pricing in derivatives [markets shows that traders expect](https://www.financedigest.com/the-immunooncology-market-is-expected-to-grow-on-a-persistent-note-in-the-future.html "The Immunooncology Market is expected to grow on a persistent note in the future") rates to peak at more than 4.8% in September. [Investment banks](https://www.financedigest.com/investment-banks-trading-revenue-likely-to-shrink-barclays-boss-says.html "Investment banks’ trading revenue likely to shrink, Barclays boss says") have become more upbeat about the pound in recent weeks as the currency has rallied. Barclays analysts told clients on Sunday that “another [hike from the BoE](https://www.financedigest.com/uk-inflation-hits-9-4-bolstering-bets-on-big-boe-rate-hike.html "UK inflation hits 9.4%, bolstering bets on big BoE rate hike") should be supportive for GBP. [Goldman Sachs](https://www.financedigest.com/telefonica-hires-goldman-sachs-to-sell-uk-mobile-masts-stake-el-confidencial-says.html "Telefonica hires Goldman Sachs to sell UK mobile masts stake, El Confidencial says") on Friday said it was now “constructive” on the pound. We think that the same factors that acted as headwinds on Sterling in 2022 – mostly natural gas [prices and the relative stance of BoE](https://www.financedigest.com/ryanair-places-major-boeing-order-after-jet-price-spat.html "Ryanair places major Boeing order after jet price spat") policy – have turned to tailwinds,” its analysts wrote. However, [Deutsche Bank](https://www.financedigest.com/citigroup-to-buy-deutsche-bank-license-in-mexico-for-wholesale-unit.html "Citigroup to buy Deutsche Bank license in Mexico for wholesale unit") strategist Shreyas Gopal took a contrary view in a note on Wednesday, saying the rally had likely run out of steam. Having been bullish on the pound since the start of the year, we no [longer think](https://www.financedigest.com/half-of-employees-aged-40-and-over-in-the-accounting-banking-and-finance-industries-think-they-will-have-to-work-longer-to-live-the-life-they-want.html "Half Of Employees Aged 40 And Over In The Accounting, Banking And Finance Industries Think They Will Have To Work Longer To Live The Life They Want") the pound presents attractive risk-reward in the short term,” Gopal wrote. [(Reporting by Harry](https://www.financedigest.com/britains-prince-harry-arrives-at-balmoral-itv-reporter.html "Britain’s Prince Harry arrives at Balmoral – ITV reporter") Robertson; Editing by Angus MacSwan) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---