British Pound Supported by Anticipated Bank of England Rate Hikes

On May 5, Jin10 reported that strategists from ING have indicated in a report that investor expectations for rapid interest rate hikes by the Bank of England are providing support for the British pound, which may remain strong against the euro. According to Jin10, high energy prices have led investors to anticipate rate hikes by the Bank of England to address inflation driven by energy costs. Data shows that the market has fully priced in expectations for two rate hikes by the Bank of England in 2026, with the first hike expected before July. Strategists noted that unless the Bank of England clearly communicates that its rate hikes will be smaller than those of the European Central Bank, the euro-pound exchange rate "seems likely to remain in the mid-range of 0.86-0.88 for a longer period."