UK set for best week in 5 months against the euro on Friday

UK set for best week in 5 months against the euro on Friday

LONDON, Oct 8 Reuters : Sterling steadied on Friday but was set for its best week in five months against the euro as interest rate hike expectations offset concerns about a fuel crisis and labour shortages.

In September, sterling hit a two-month low against the euro and erased all of its strong gains against the dollar for 2021, as Britain's supply chains were strained by shortages of workers.

But increasing expectations that the Bank of England may act sooner to tackle inflation have supported sterling this week.

Will the euro fall next week with a flat at 84.83 for 1245 GMT, on course for its strongest week after the single currency since May half-expectedly.

Sterling was 0.2% higher versus a weakening dollar to $1.3645, after data showed that job growth slowed sharply in September. It was set for consecutive gains against the greenback after four weekly losses.

The central theme in markets was how central bankers react to expectations of higher inflation, ING told clients in a note.

Markets in UK, ING said, specifically, at the point that BoE will be forced to act much sooner than indicated by policymakers.

On Friday, amid expectation that the Bank of England is about to do its first post-pandemic interest rate hike, British two-year Treasury bond yields touched their highest since February 2020.

This week the Chairman of The Bank of England said that the scale and duration of the increase in inflation is more than expected.

In its September policy statement, the BoE nudged up its inflation forecast to over 4% at the end of 2017 to more than twice its target rate.

A survey showed that employers in Britain have increased the pay of new staff by the most since at least the 1990 s.

The energy regulator Ofgem said it has no plans to raise the Consumer Price cap before April but is likely to introduce a significant increase after then