UK pound hits highest level against euro since February 2020

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UK pound hits highest level against euro since February 2020

January 10, Reuters -- On Monday, the highest level against the euro since February 2020 despite rising expectations and easing fears of the adverse impact of the Omicron variant on the economy.

The currency has strengthened since mid-December as the UK government resistance to further COVID 19 restrictions has provided a much-needed boost to sentiment.

Britain has focused on rolling out booster vaccinations - which have reached more than 60% of the population - rather than requiring a return to lockdown measures.

After a surprise hike in December, investors have ramped up expectations that the Bank of England will raise interest rates as early as next month.

We're looking for a decent November UK GDP release of 0.4% month over month, which should keep expectations alive for a Bank of England rate hike on February 3, as overnight indexed swap OIS market prices have an 80% chance of a 25 bps hike, according to analysts.

A preliminary estimate of UK gross domestic product for November is due on Tuesday.

The pound dropped 0.1% versus the dollar to $1.358 at 0903 GMT, close to its highest level since November 2021 at $1.3599 touched last week.

It was a 0.2% increase at 83.38 pence per euro, after hitting its highest level since February 2020 at 83.34.

The pound entered 2022 with a tailwind of cautious optimism, the market will look closely at Omicron data, and any immediate indication of Liz Truss's focus areas, as an indication of the tone taken by the Bank of England in Q1, said Joe Tuckey, FX Analyst, Argentex.

After the resignation of Brexit minister David Frost, Britain's foreign secretary Liz Truss is the lead negotiator with the European Union over trade to Northern Ireland.

According to Truss, ahead of talks with the European Union over post-Brexit trade arrangements, the United Kingdom is ready to take unilateral action to suspend customs checks on goods moving to Northern Ireland.