The British pound continued to rise on Tuesday, with markets expecting it to continue rising next year, with the Bank of England expected to introduce interest rate cuts later than the Federal Reserve and the European Central Bank. At the same time, bets that the Federal Reserve would implement rate cuts as soon as March next year sent the dollar downward.
Against the greenback, the sterling rose 0.42% to $1.27. The euro weakened 0.19% against the pound to 86.18 pence. Over the past three months, the pound has risen 2.5% against the US dollar, with investors increasingly betting that the Federal Reserve would start cutting interest rates as soon as March 2024.
“The prevailing view that Bank of England rate cuts will be lagging those of the Fed in 2024 has supported the pound,” Jane Foley, head of FX strategy at Rabobank, observed. “We see scope for cable to track up to $1.30 on a nine-to-12-month view on rate differentials.” This view rests on the pound continuing to rise as investors continue to expect the Bank of England to hold back on rate cuts beyond its American and European counterparts.
