Sterling stayed close to its weakest level in four months against the euro on Friday, following a relatively dovish stance from the Bank of England the day before.
The BoE on Thursday delivered its 10th straight interest rate hike, raising the key interest rate by 50 basis points to 4% – its highest since 2008.
However, comments from Governor Andrew Bailey that inflation may have “turned a corner” signalled that Britain’s central bank may be close to bringing its tightening cycle to an end.
“More hikes from the BoE require persistently elevated inflation surprises, not just persistently elevated levels of inflation,” said Jamie Fahy, head of global macro strategist at Citi.
“The BoE’s terminal rate priced into the market was well above 4%. Rates have a moment to play and when you take out some of that rate pricing, the currency will come under pressure.”
Sterling was trading largely unchanged from Thursday’s close against the euro, last at 89.22 pence, after hitting its weakest since September at 89.55 pence following the BOE’s decision.
Against the dollar, the pound strengthened 0.2% to $1.2253, recovering from an over three-week low hit earlier in the session.
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