The British pound hits a 2025 high against the euro as central banks diverge in response to inflation, with the Bank of England poised to raise rates.
British pound gains against the euro
The British pound reached its highest level since the spring of 2025 against the euro on Friday, October 30, with one euro exchanging for 0.83380 pound, a 0.42% decline over seven days. The Swiss franc and the Canadian dollar also advanced against the euro, while the U.S. dollar showed a less clear trend. Bank of England expected to raise interest rates
According to a Reuters survey of 63 economists in mid-October, 54 expect the Bank of England to raise its main rate to 4% on Thursday, compared to 3.75% currently. British prices rose 3.5% over one year in September, more than expected. The budget on October 28 maintained the deficit reduction course without increasing the debt cost. Interest rate differential boosts pound
The interest rate differential makes the rest: the British rate leads the European Central Bank's by 1.25 percentage points, and on Thursday it would reach 1.5 percentage points. Better remunerated, investments in pounds attract capital before the decision. European Central Bank holds rates steady
The European Central Bank, on the other hand, kept the deposit rate at 2.5% on October 29, while prices had risen 3.8% in September. Once inflation is removed, an investment in euros loses value. According to the analysis, this difference in yield explains the underlying trend of the pound. Future rate hints will influence the pound
The increase on Thursday is already almost fully included in the rates. What will move the pound is the intentions the Bank of England will hint at for the future. If its message opens the door to new increases, those who bet against the pound, amounting to 79,414 contracts as of October 27, will have to buy back: the euro would then fall back to 0.8270 pound. Other currencies show mixed trends
Elsewhere, in the case of the yen, bets and prices contradict each other: bets on a stronger Japanese currency reach 101,591 contracts, and Morocco, which is opening its winter season, is quietly appreciating. The reference rate of Bank Al-Maghrib gave one euro for 10.9836 dirhams on October 30, compared to 11.217 at the beginning of the month, or nearly 2% less. Euro's value fluctuates against the dollar
The European currency has lost 0.19% against the dollar over seven days, to 1.1172, before returning to 1.1180 on Monday morning. A weak American job would bring it closer to 1.1300 dollar; a good figure would take it back to 1.1080. In the case of the yen, bets and prices contradict each other: bets on a stronger Japanese currency reach 101,591 contracts, and the yen has nevertheless declined to 176.50 yen for an euro on Monday. Mid-term elections and economic data ahead
The results of the American mid-term elections will fall in the night between Tuesday and Wednesday. Bettors on the site Kalshi give a 91% chance to a Democratic House of Representatives. A surprise Republican victory would push the dollar higher. On Wednesday, a first measure of the price increase in October in the euro zone is expected between 3.9% and 4.0% over one year; beyond that, the hypothesis of a deposit rate increase in December would strengthen. Iran and oil prices
Iran remains: Tehran has said it is ready, under conditions, to a reopening of the Strait of Hormuz, which brought the Brent barrel back to 110 dollars on Monday. A rise in crude oil would benefit the dollar, the United States selling more than it buys.
