Sterling Hits Highs Coming into 2022

Let me first wish you all a happy New Year and we thank you for your support throughout 2021.

Sterling finished the 2021 in a strong fashion as it hit its highest level against the euro since the end of February 2020 as easing concerns about the economic impact of the pandemic boosted risk-on currencies, while analysts expect more rate rises from the Bank of England in 2022.

Risk appetite was supported by signs that governments, despite coronavirus cases hitting record highs, are trying to limit the economic damage by relaxing rules on isolation rather than resorting to lockdowns. The Pound-Euro rate ended the year strong following an almost nine day rally from early December lows. With the Bank of England already starting to shift rates higher and the ECB unlikely to do so for a while, the risk is the EUR/GBP currency pair will continue to slide.

Sterling advanced through the holidays after a series of studies suggested the Omicron variant of coronavirus could be milder than its relatives, easing market concerns about its economic impact and prompting investors to anticipate another rate rise from the BoE as soon as February.

Sterling was up 0.1% against the euro , after hitting its highest level since Feb. 26, 2020. The pound was down around 0.1% versus the dollar on Friday but came within its highest reading since November 10. Markets currently price in about a 95% chance of a 100 basis points rate rise from BoE by the end of 2022.

The calendar to start this year is quite quiet with no high impacting data releases set for today.