LONDON, United Kingdom: The British pound outlook has weakened after sterling outperformed several major currencies this year, as investors increasingly expect other central banks to raise interest rates.
Sterling has gained about 1.6% against the euro in 2026. It is also up 2.8% against the Swiss franc, 4.9% against the Swedish krona and 1% against the Canadian dollar, according to CNBC.
However, the pound is roughly flat against the U.S. dollar and down 1.3% against the Japanese yen. Matthew Ryan, head of market strategy at Ebury, described sterling as a recent “surprise outperformer” among G10 currencies.
He linked the gains partly to resilient U.K. economic growth. Britain’s gross domestic product grew 0.4% in the second quarter after expanding 0.6% in the first quarter, according to the report.
Read: UK GDP July Forecast Points to 0.1% Economic Contraction
The Bank of England has kept its key interest rate at 3.75% this year. Current market pricing points to low odds of an increase at its September meeting.
By contrast, markets expect tighter policy from the European Central Bank and increasingly from the U.S. Federal Reserve.
Read: UK Autumn Budget Faces Pressure From Iran War Costs
Jane Foley, senior foreign-exchange strategist at Rabobank, said dovish Bank of England messaging could leave sterling more exposed before the U.K. government presents its budget on October 28.
Finance Minister John Healey has pledged fiscal discipline, while analysts are watching the budget for potential tax changes, higher borrowing and their effect on economic growth.
