Sterling at Fresh 16-Week High

On Thursday, sterling rose to a near 16-week high against a broadly weak dollar, with currency traders ignoring gloomy British manufacturing data for the time being.

The pound was last up 0.8% against the dollar, trading at $1.2157, its highest level since August 12, surpassing the previous high of $1.2153 set on November 24.

The sterling was also 0.6% stronger against the euro, trading at 85.865 pence per euro.

The dollar fell more than 1.5% against the yen on Thursday. It hit a three-month low after Chairman Jerome Powell said rate hikes could change “as soon as December.”

The pound has recovered ground lost following then-Prime Minister Liz Truss’ mini-budget in September.

Despite recent gains, the pound is still 10.3% lower on the year, and traders are still concerned about Britain’s bleak economic outlook.

Data released on Thursday showed that British manufacturing activity fell for the fourth month in November. Meanwhile, businesses faced the weakest overseas demand in two and a half years. It leads to job cuts and lower confidence for the coming year. In the United Kingdom, inflation remains at a four-decade high as households grapple with a cost-of-living crisis. Meanwhile, the Bank of England (BoE) has been raising interest rates since late 2021 to return inflation to the 2% target.

Eurozone banks have not yet fully accepted the reality of an economic downturn, so financial industry regulators will have to force them to be more conservative in capital management, according to ECB supervisory chief Andrea Enria on Thursday.

As sky-high energy costs hit consumer budgets, the eurozone is almost certain to enter a recession this winter. However, banks have been chastised for downplaying the likely impact during an unusual period of high earnings.

Energy market volatility has increased financial stress for energy traders and producers. Hence, regulators have temporarily relaxed collateral requirements to avoid a repeat of the early autumn liquidity squeeze.