Pound climbs to seven year high against euro

Holidaymakers heading to Europe saw their budgets boosted on Wednesday as the pound climbed to its strongest against the euro in more than seven years.

Sterling climbed by as much as half a cent against the euro to €1.354 on Wednesday, its strongest since January 2008. The pound also climbed by close to half a cent against the dollar, to $1.53.

Against the Bank of England's trade-weighted currency basket, which compares the pound to a range of other currencies, sterling rose above 90 for the first time since October 2008.

Analysts said traders were covering their positions as there was a chance that the Bank could signal on Thursday that an interest rate rise could come sooner than recent market expectations for summer 2016.

"Sterling is today’s best performing currency ahead of the Bank of England's Inflation Report, which, although will support market expectations that rates would not rise before spring 2016, may be followed by a hawkish testimony from Governor Mark Carney, whose pronouncements have proven to be more upbeat than Bank reports," said Ashraf Laidi, chief global strategist at City Index.

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