Sterling rises against euro as expectations of February interest rate hike grow

Another rate hike expected in February

The pound neared a two-year high against the euro on Tuesday (4 January) amid growing expectations that the Bank of England will increase interest rates in February.

Meanwhile two-year and ten-year British government borrowing costs also rose to a two month high, rising six basis points on the day after Prime Minister Boris Johnson announced no new measures were needed to curb Omicron infections. Money markets were reported to be pricing in two 15 basis-point rate increases by the Bank of England prior to its March meeting to combat soaring UK inflation. As of this morning (5 January), £1 was equivalent to €1.20. At the same time, British economic activity has been said to be generally firm, with the latest revised Purchasing Managers Index fig...