Sterling rose versus the euro today to an almost two-week high against the single currency with upcoming French elections adding to jitters that have put the euro under pressure since the beginning of the war in Ukraine.
The pound fell 0.25 per cent to touch its highest level of 83.15 pence versus the euro since March 23 at 0835 GMT.
“Sterling has managed to recover some lost ground against the euro in recent sessions. This, however, is largely down to the softer tone in the EUR,” said Jane Foley, head of FX strategy at Rabobank London.
“The single currency is more exposed to concerns about energy security than the pound but in addition some nervousness is apparent in the market ahead of the first round of the French election this weekend,” she added.
French eurosceptic, far-right candidate Marine Le Pen, closing in on President Emmanuel Macron in the polls, has added another threat to the euro.
After touching a three-week low in the previous day against the US dollar GBP=D3, the pound edged 0.12 per cent up to US$1.3085.
Foley said there were “few signs of the pound making any significant headway against the USD, with the latter having been boosted this week by yet another step up in hawkishness from the Fed”.
Meeting minutes showed Federal Reserve officials viewed the hefty rate increases as appropriate at future meetings, especially if inflation pressures intensify.
Minutes from the European Central Bank due later in the day are unlikely to sound as decisive as the Fed’s.
Analysts will keep a close eye on a speech from Bank of England chief economist Huw Pill, also due later in the day.
Markets expect the BoE to raise rates by 133 bps this year.
ING said it sees those expectations adjusting south in the second half of the year.
“Given high inflation that will go higher he may not want to issue a rate protest today,” ING analysts told clients, referring to Pill.