Sterling rises against euro on signs British rate cut will be delayed

Sterling on track for its biggest weekly rise against the euro since early January, up 0.5%

It is anticipated that the Bank of England is likely to wait somewhat longer than the Fed and the ECB to start easing policy.

Sterling rose against a weakening euro and dollar after signs that the European Central Bank (ECB) and the US Federal Reserve are closer to cutting interest rates than the Bank of England (BoE) because inflation in Britain is staying at higher levels than elsewhere. 

The pound rose to $1.2826, after hitting its highest since August against a weakening dollar. 

It was set for its sharpest weekly jump against the dollar since November, up 1.4% this week.

Against the euro, sterling climbed to 85.17p, after jumping to a more than three week high. 

It was on track for its biggest weekly rise against the euro since early January, up 0.5%. 

Analysts said sterling's firmness this week was less a product of the British fiscal outlook and more related to pressure on the dollar and euro after Fed chair Jerome Powell sounded more confident about cutting interest rates in coming months, while the ECB's governing council had begun to discuss a suitable timeline for monetary policy easing. 

"We think the BoE is likely to wait somewhat longer than the Fed and the ECB to start easing policy," said Karsten Junius, chief economist at J Safra Sarasin Sustainable Asset Management.

"The main reason for this delayed reaction is that so far, the fall of services inflation and wage growth has been very limited, suggesting that underlying inflation might be stickier than elsewhere," the economist said. 

Money markets are pricing in a Bank of England interest cut only in August, according the LSE Group data. 

Markets see a first Fed cut in June, according to CME Group.

• Reuters