Sterling Soars Amid Interest Rate Uncertainty and Political Scrutiny

Sterling appreciated against both the dollar and the euro, as investors maintained a cautious stance due to potential interest-rate fluctuations and the prevailing market sentiment.

The currency's short-term outlook appears unfavorable amid UK political instability and the likelihood of further Bank of England rate cuts. A strong correlation exists between the pound and global equities, marking it as a risk-sensitive currency.

Notably, BoE Governor Andrew Bailey hinted at the possibility of a rate cut in March, though service price inflation hasn't declined as much as expected. Gilt yields also fell, drawing attention ahead of upcoming UK debt announcements, especially during Prime Minister Keir Starmer's contentious political climate.