Sterling Surges Amid Eurozone Politics

Sterling reached its strongest against the euro in over two years, buoyed by the UK central bank's hawkish stance and political instability in France and Germany. The euro reached its lowest point since early 2022, while political and economic factors suggest sustained euro weakness despite ECB rate cuts.

Sterling was at its strongest against the euro in two-and-a-half years, thanks to the Bank of England's hawkish approach and political uncertainties in France and Germany. However, it dipped against a strengthening dollar amid expectations of significant U.S. inflation data.

The euro weakened to as low as 82.35 pence, the lowest since March 2022. Concerns about euro sterling exchange rates returning to levels seen before the Brexit referendum have surfaced as the ECB remains more growth-oriented amid political challenges in France and Germany.

While the UK economy faces its own set of issues, the presence of a budget and a possibly more cautious Bank of England provide support for sterling. In contrast, the ECB is expected to engage in multiple rate cuts, fueled by weak eurozone growth and political disarray.

(With inputs from agencies.)