Euro 'heading towards 90p' as rates deep freeze hits sterling
The single currency rose to 88.12p, its highest since 4 November, before easing to 87.85p, close to unchanged on the day.
The single currency had narrowly extended its 1 per cent rise of Thursday, when weaker-than-expected UK consumer spending data raised concerns over growth, which could further delay an interest rate rise from the Bank of England.
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Hide AdGeraldine Concagh, economist at AIB Treasury Group, said: "The pound is under pressure. Weak retail figures, a dovish tone from the MPC minutes on Wednesday, George Osborne cutting the UK growth outlook and rate hike expectations being pushed back are all putting sterling on the back foot."
The Chancellor downgraded his projections for UK growth to 1.7 per cent for this year in Wednesday's Budget, while Thursday's weaker retail sales data was a reminder the UK consumer is being hit by a fiscal squeeze and rising inflation.
Money markets are pricing in the first rate hike in the UK for August. On Tuesday, after inflation jumped to its highest in two-and-a-half years, they had expected the first hike in July.
Beat Siegenthaler, currency strategist at UBS, said: "Jean-Claude Trichet (European Central Bank president] and others have made it clear that they will hike rates as intended despite news events around the world.
"The discrepancy between the BoE and ECB is pulling the euro higher against sterling. There is a good possibility that the euro can go as high as 90p."