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Sterling Hits Nine-Day High vs Euro as Spring Statement Eyed

LONDON, March 22 (Reuters) - The British pound strengthened to a nine-day high against the euro on Tuesday as it continues to retrace losses seen after the European Central Bank and Bank of England policy decisions in the last two weeks.

The Bank of England hiked its interest rate by 25 basis points on Thursday and signalled a slower pace of tightening, but the pound has outperformed the single currency since the decision.

"Its strength, despite last week's dovish hike by the BoE, is a reminder that continental Europe faces the same, if not worse pressure from the current energy shock," ING said.

Against the euro, sterling was trading 0.3% higher at 83.44 pence, its strongest level against the single currency since March 9.

The pound rose 0.2% against the U.S. dollar to $1.3190.

Focus over the coming days could turn to the UK inflation data and British finance minister Rishi Sunak's Spring Statement, both scheduled on Wednesday.

Sunak, who is preparing the budget update, said on Tuesday it was more important than ever to take a responsible approach to public finances.

Meanwhile, Commerzbank says Wednesday's inflation data could move the pound "considerably" if CPI once again exceeds expectations.

"If this was to be the case again tomorrow the BoE rate hike expectations could be fuelled again, allowing sterling to recover somewhat further against EUR," Commerzbank FX and EM analyst You-Na Park-Heger said.

Reporting by Samuel Indyk; Editing by Saikat Chatterjee, William Maclean

Source: Reuters

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