By Joice Alves
LONDON -Sterling rose on Thursday as global risk sentiment improved a tad and analysts said the prospects of a Bank of England rate hike reduced some downside potential for the currency.
Sterling erased all of its strong 2021 gains in September amid concerns about British economic growth and rising inflation, while the country grappled with a fuel crisis.
Improved global risk sentiment on Thursday - with oil prices bouncing back from multi-year lows, Russian President Vladimir Putin promising to boost gas supplies, and European stocks in positive territory - lent some support to the risk-sensitive pound.
Analysts said the prospects of an interest rate hike in Britain were also supporting the pound.
Markets have "supported the GBP against the EUR thanks to BoE hike bets despite the combination of domestic risks in the UK", said Shaun Osborne, chief FX strategist at Scotiabank.
UniCredit Research analysts said in a note to clients that the prospect of higher rates in Britain was reducing "the downside potential" for cable as well.
Markets currently expect a 15 basis point rate rise in December and additional hikes in 2022.
Analysts have also flagged that sterling has reacted very little to renewed post-Brexit uncertainties and problems with the trading situation of Northern Ireland.
The British currency rose 0.2% versus a weaker dollar to $1.3606 at 1200 GMT., after marching on Wednesday towards a December 2020 low touched last week amid a sharp rise in energy prices.
It edged 0.1% higher versus the euro to 85.00 pence.
Meanwhile, energy regulator Ofgem said more British energy suppliers could go bust as high wholesale energy prices are set to continue.
Data from mortgage lender Halifax showed that British house prices rose by the most in almost 15 years in September ahead of the end of a tax break for house buyers and they were expected to continue their climb to new record high levels.
