UPDATE 2-Pound set for best week vs euro in 5 months on BoE hike bets

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* Graphic: World FX Rates in 2021 tmsnrt.rs/2egbfVh

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*Graphic: trade-weighted sterling since the Brexit vote tmsnrt.rs/2hwV9Hv (update rates)

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LONDON, Oct 8 (Businesshala) – Sterling held steady on Friday but was set for its best week in five months against the euro as hopes for a hike in interest rates fueled concerns about a crisis and labor shortages. Huh.

In September, sterling hit a two-month low against the euro and erased all its strong gains against the dollar for 2021 as Britain’s supply chain was strained by labor shortages.

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But rising hopes have supported sterling this week that the Bank of England may act soon to tackle inflation.

Compared to the euro, it flattened to 84.82 pence by 1440 GMT, on track for a single currency versus its strongest week since mid-May.

Sterling rose 0.2% to $1.3644 against the dollar, after briefly hitting a 10-day high of $1.3661, as data showed US job growth slowed sharply in September. After four consecutive weeks of losses, it was set for a weekly gain versus the greenback.

ING told clients in a note that the central theme in the markets was how central bankers react to higher inflation expectations.

“In the UK, the markets are clearly of the view that the BoE will be forced to act much sooner than is indicated by policymakers,” ING said.

Amid expectations the Bank of England is approaching its first post-pandemic interest rate hike, the British two-year government bond yield on Friday rose to its highest level since February 2020.

Bank of England chief economist Hu Pill reiterated this week that the size and duration of the inflation boom is proving to be higher than expected.

In its September policy statement, the BoE raised its forecast for year-end inflation to 4%, more than double its target rate.

A survey has shown that employers in the UK have increased the salaries of new employees the most since at least the 1990s.

Britain’s energy regulator Offgame said it has no plans to raise consumer price limits before April, but is likely to introduce a significant increase after that. (Reporting by Joyce Alves; Editing by Susan Fenton, Alexander Smith and Ken Ferris)

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