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Sterling hit a 10-month high against the euro as investors bet Britain’s COVID-19 vaccinations would help its coronavirus-battered economy reopen quickly and recover from its biggest hit in 300 years.

The pound rose 0.2% against the euro to as high as 86.84 pence, its highest since April 2020. A day earlier, it had climbed to its best against the common currency since May last year.

Britain has vaccinated 15.6 million people with a first dose against COVID-19 so far, with bets that its tattered economy could reopen quickly bolstering the pound.

Expectations of large fiscal stimulus in the United States have also sent the pound to its highest in two-and-a-half years against the dollar.

British inflation edged up in January as locked-down consumers paid more for food and sellers of furniture and other household goods offered smaller-than-usual New Year discounts to people seeking to spruce up their homes.

The annual 0.7% increase in consumer prices is expected to gather speed in the coming months – pushed up by the end of an emergency tax break and possibly the impact of Brexit – and might go above the Bank of England’s 2.0% target this year.

Economists said there was little pressure on the central bank to think about scaling back its stimulus plans.

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