Pound soars as Brexit Britain’s sterling hits two-year high against beleaguered euro | Personal Finance | Finance

The pound has soared to its highest value against the euro in nearly two years as predictions of interest rate cuts on the continent.

Sterling was this morning trading at €1.179, rising by as much as 0.3 percent, before dipping back down to 1.1752 by 2.30pm.

The increase comes off the back of weeks of strengthening against the single currency, with the pound having gained almost 0.6pc in the past month.

On of the main drivers is widespread expectations that the Bank of England will be cutting interest rates less sharply that policymakers throughout the EU.

Higher interest rates offer investors the chance to make higher returns, which in turn inflate the value of a currency.

Traders believe the European Central Bank in Frankfurt will be one of the first to begin slashing interest rates, possibly as soon as next month.

Speaking to the Financial Times, ECB chief economist Philip Lane said: “Barring major surprises, at this point in time there is enough in what we see to remove the top level of restriction.”

Markets are betting on least two ECB interest rate cuts this year.

By contrast, the Bank of England, in the City of London, is only anticipated to be planning one interest rates cut this year.

It follows strong services inflation figures last week, which prompted traders to push back their prediction for a first interest rates reduction from 5.25pc from June to November.

The upcoming election has means few people are expecting an interest rate cut imminently.

Since it become independent in May 1997 – one of the first decisions of Chancellor Gordon Brown, the Bank of England has never cut rates immediately prior to a general election.

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