Sterling Slips Slightly But Holds Near Multi-Year High

Sterling edged lower on Friday but remained near a two-and-a-half-year peak against the dollar, boosted by China's stimulus and different monetary policies between the Bank of England and other major central banks. It experienced its second week of gains against the dollar and held steady against the euro.

Sterling marginally declined on Friday but stayed close to its two-and-a-half-year peak against the dollar. This movement came as increasing risk appetite following China's stimulus plan and divergent monetary policies between the Bank of England and other major central banks provided support.

The pound, 0.25% lower at $1.33815, remained near this week's peak of $1.3434, its highest level since February 2022. The pound typically gains when investors seek riskier assets like equities, which surged on Thursday. It was on track for its second consecutive week of gains against the dollar.

Despite these gains, ING analyst Francesco Pesole warned that sterling might start to seem overpriced if expectations for a 50bp Federal Reserve cut are unfounded. Meanwhile, against the euro, the pound held steady at 0.83385, poised for its third consecutive week of gains. Finance Minister Rachel Reeves' upcoming budget announcement could create volatility, with potential increases in capital gains tax and national insurance contributions. Prime Minister Keir Starmer promised a fair approach to addressing public finance shortfalls.

(With inputs from agencies.)