GBP Surges Above 1.1650 as UK Yields Soar

The British Pound (GBP) has surged against the Euro (EUR), breaking above the 1.1650 threshold, thanks to elevated UK yields and assurances on fiscal discipline from Chancellor Healey.

The Pound's gain is largely driven by expectations of a November rate hike from the Bank of England, with markets pricing in an 85% chance of a 25 basis-point increase at the upcoming meeting.

However, concerns remain over the UK economy's ability to absorb expensive borrowing, elevated energy costs, and weaker growth. HSBC maintains a cautious stance on the UK economy, noting that higher energy prices create a difficult policy mix for the Bank of England.

According to BBVA head of G10 FX strategy Roberto Cobo, 'For sterling, a rate hike could provide near-term support, especially if accompanied by stabilisation in UK rates.'