The euro found some relief this week as fluctuations in the AI sector weakened the dollar, providing a brief respite from recent pressures. The British pound, meanwhile, continued its upward trajectory, marking a third consecutive weekly gain against the euro. This shift comes after a French bond selloff earlier in the month, which had put the single currency under strain. Investors are closely monitoring UK economic data and fiscal policies for further clues.
The pound reached its highest level against the dollar in over three weeks on Friday, ending a four-week losing streak. Britain's economy outperformed expectations in August, driven by a surge in the computer programming sector, which is seen as a sign of AI's positive impact on growth. Thu Lan Nguyen, head of forex and commodity research at Commerzbank, noted that this economic resilience gives the Bank of England room to raise interest rates without risking further economic strain.
The euro faced a 0.24% weekly decline against the pound and was last down 0.12% at 84.41 pence on Friday. It had earlier touched 84.28 pence on Wednesday, its lowest point since June 2025. Sterling was set for a weekly rise of 0.66% against the dollar, trading at $1.3329, its highest level since September 23. Investors remain focused on the Bank of England's rate path, with markets expecting a 25 basis point hike at its next meeting on November 5.
BoE Governor Andrew Bailey commented that soaring energy prices have had limited wider effects on British prices so far, but cautioned that it is too soon to draw firm conclusions about potential second-round effects. Meanwhile, British finance minister John Healey announced that his first budget, to be delivered on October 29, will include measures to provide some financial relief to the country.