Sterling Rises to New Heights Amid U.S. Consumer Confidence Dip

The pound reached its highest level against the dollar in two-and-a-half years due to a decline in U.S. consumer confidence and the Bank of England's slower approach to interest rate cuts. China's new economic stimulus measures also boosted the pound. Sterling is the top-performing G10 currency against the dollar this year.

The pound surged to its highest mark against the dollar in two-and-a-half years on Tuesday, buoyed by weakened U.S. consumer confidence and the Bank of England's slower trajectory for rate cuts compared to the Federal Reserve.

China's latest economic stimulus package, unveiled earlier on Tuesday, added to sterling's vigor. Beijing announced a significant 50 basis point cut to banks' reserve requirements, signaling potential easing of lending rates and property market support, which lifted the yuan and other volatile currencies like the pound and the Australian dollar.

By afternoon trading in Europe, the dollar dipped following an unexpected fall in the U.S. Conference Board's consumer confidence index for September, reflecting growing concerns about the labor market. Sterling climbed as much as 0.38% to hit $1.33985, the strongest since March 2022, and maintained a 0.27% rise at $1.3384. Against the euro, the pound remained flat at 83.305 pence. Investors, with a bullish position worth approximately $5.2 billion in sterling, foresee further gains, especially given a potentially softer dollar environment.

(With inputs from agencies.)