Japanese banking group MUFG expects the Bank of England to begin raising interest rates in November, a development it says would add support for the British pound against the euro, according to a report from exchangerates.org.uk that was carried on Forex Factory.
Pound gains against the euro
The pound-to-euro exchange rate ended last Friday near €1.1814, according to the report. That is up about 0.9% since the start of October. The currency’s strength comes as investors compare France’s fiscal difficulties with the pressures facing the UK ahead of its own Budget.
Budget a key test for the UK
The report notes that the UK government must avoid unsettling bond investors with its Budget, scheduled for 28 October. How markets receive the fiscal plans could influence sterling and the broader outlook for UK borrowing costs, alongside any decision by the Bank of England on interest rates.
Analyst view
Lee Hardman, MUFG’s senior currency analyst, wrote on 8 October that the pound had strengthened sharply against the euro since the end of September. He linked the move to a broadening sell-off in the euro, which he said had shifted the EUR/GBP exchange rate.
Why it matters
Currency movements between sterling and the euro affect businesses, travellers, investors and individuals who send or receive money across borders. Expectations of higher UK interest rates generally make a currency more attractive to investors, though markets can shift quickly as new economic data and policy announcements emerge.
Note: The Bank of England has not yet announced a rate decision for November. The forecast described here is MUFG’s expectation, not a confirmed policy move. This article is based on a summary of a report from exchangerates.org.uk; readers should consult the full story and official Bank of England announcements for further detail.
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