On Wednesday, Sterling maintained its strength against the dollar, lingering near Monday’s three-year high due to positive economic data and Britain’s recent trade agreements.
Investors are keenly awaiting finance minister Rachel Reeves’s multi-year spending review, which is expected to outline the budgets for public services in two weeks. Sterling remained relatively stable at $1.3511 but stayed close to its three-year high of $1.3593 achieved on Monday.
Against the euro, Sterling showed little change, with the euro remaining broadly flat at 83.86 pence. This comes amidst the euro’s seven-week losing streak against the pound. Rabobank strategist Jane Foley highlighted Sterling’s remarkable performance, attributing it to stronger-than-expected inflation and retail sales data last week, as well as trade deals with India and the U.S. However, the upcoming review directs attention to the fiscal challenges facing Reeves, as the government balances tight spending and tax policies with increased funding in sectors like defense and health.
Reeves’s budget outlines are expected on June 11. Sterling has risen by 8% against the dollar this year, regaining ground against the euro from its April lows. Recent data showed a surge in British retail sales in April, while inflation trends have shifted expectations for the Bank of England’s next meeting in June. BNP Paribas’s Paul Hollingsworth highlighted ongoing supply-side issues and potential fiscal policy adjustments, despite consumer spending optimism.
(With inputs from agencies.)
