Pound Heads for First Monthly Gain Since August Before Expected Bank of England Hike as Euro Falls in October

The British pound ended October on track for its first monthly gain against the U.S. dollar since August, as traders positioned for a Bank of England interest rate increase next week, while the euro lost ground against the other major currencies. Sterling rose 0.4% on Friday, October 30, 2026, to $1.3429, making it the best-performing major currency of the day, and was heading for a gain of about 1% for the month, Reuters reported.

Based on Yahoo Finance data, the pound's daily close moved from 1.3264 at the end of September to 1.3379 on October 30, a gain of nearly 0.9%.

Bank of England in focus

Money markets show traders almost fully pricing in a Bank of England rate increase next week, followed by a second in February and a third by July, according to Reuters. A summary published with the report put the expected decision date at November 5.

Finance minister John Healey delivered his first budget on Wednesday. He said the government's fiscal headroom stood at £15 billion ($19.93 billion), in line with expectations in a Reuters poll but below £23.6 billion in March. The spending plans did not provide surprises that moved the pound or government bonds strongly, or materially change the interest rate outlook, the news agency reported.

"We expect the Bank of England's patience to have run out with the unfolding energy shock," Sanjay Raja, chief UK economist at Deutsche Bank, said in a note cited by Reuters. UK inflation is at 3.1%, and most economists believe it is time to raise borrowing costs, according to the report.

For 2026 so far, the pound is down 0.6% against the dollar, compared with a decline of nearly 5% for the euro and 0.6% for the yen, Reuters said. The euro has lost more than 4% against sterling this year.

Euro's second monthly loss

The European Central Bank's euro reference rate was set at $1.1172 on October 30, down 1.61% from $1.1355 on September 30, according to ECB data compiled by DatelineHQ. Against the pound, the euro fell 2.44% to 0.8338, its largest monthly decline since October 2022. It also lost 1.45% against the yen, to 175.68, and 2.37% against the Chinese yuan, to 7.4326.

It was the second month in a row in which the euro declined against all four of those currencies, the first such run since October and November 2015, DatelineHQ reported. The month's lowest fix was $1.1130 on October 29.

Investing.com, in a report published by Yahoo Finance, said the euro was weighed down by widening French sovereign spreads and the cost of elevated energy imports. Eurozone gross domestic product grew 0.4% in the third quarter, slower than 0.6% in the second, and the ECB kept its deposit rate at 2.50% this week. ECB President Christine Lagarde said policymakers had actively debated whether a rate increase was warranted.

Dollar, yen and commodity currencies

The U.S. dollar index, which tracks the greenback against six major peers, slipped 0.2% to 101.88 on Friday but was on track for an October gain of 0.4%, Investing.com reported. Hotter-than-expected U.S. consumer and producer price readings and expectations of another Federal Reserve rate increase in December supported the dollar during the month, according to the report.

The Japanese yen firmed to 157.62 per dollar on Friday and was on track for a modest 0.1% monthly decline against the U.S. currency, the same report said.

Some commodity-linked currencies gained. The U.S. dollar fell to 1.3986 Canadian dollars at Friday's close from 1.4236 at the end of September, a strengthening of about 1.8% for the Canadian currency, according to Yahoo Finance data. The Australian dollar rose about 1.2% over the month, to about $0.7027 from $0.6946, the same data show.

Currency markets reopen on Sunday evening in Asia, ahead of a week that includes the Bank of England decision, the October U.S. jobs report and the U.S. midterm elections on November 3.