The pound gained for a second week versus the euro to its strongest level in two years as the Bank of England moves toward raising interest rates, amid slower growth in the euro area where stimulus is being expanded.
Sterling advanced against most of its 16 major peers after BOE Governor Mark Carney said the point where interest rates “begin to normalize is getting closer.” It weakened versus the dollar as bets the Federal Reserve will raise rates next year boosted demand for the U.S. currency. U.K. 10-year government bonds posted their first weekly gain this month.
“Euro-sterling has been the real driver this week,” said Steven Saywell, the global head of foreign-exchange strategy at BNP Paribas SA in London. “You’ve had euro weakness and also relatively hawkish comments from Carney. That’s made the market re-think about the timing of the first U.K. rate hike. If you are bullish sterling, you want to play it short euro-sterling.”
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