LONDON, Aug 27 Reuters Sterling reached a twoyear high against the dollar on Tuesday, and also gained on the euro, supported by bets the Bank of England will cut rates less dramatically than the Federal Reserve while the British economy outperforms the euro zone.

The pound rose as high as 1.3246, its highest since March 2022, and was last up 0.25 at 1.3222.

The dollar has been under pressure in August as traders become more confident of significant Federal Reserve rate cuts this year, and the pound has been one beneficiary.

Markets are now priced for 100 basis points of cuts across the Fed39;s three remaining meetings this year, compared with around 40 basis points for the BoE though the BoE did cut rates in August.

Bank of England governor Andrew Bailey said on Friday at the Kansas City Fed39;s annual economic conference in Jackson Hole that further interest rate cuts would not be rushed because it was still too soon to be sure inflation was beaten.

In contrast, at the same event a few hours earlier Fed chair Jerome Powell said that the time had come for the U.S. interest rate cuts.

There was certainly a more cautious tone to the speech from Bailey in contrast to Fed Chair Powell39;s speech, said Derek Halpenny, head of research global markets EMEA at MUFG, in a note to clients.

Also in the mix is British inflation, which has slowed to around the BoE39;s 2 target, despite stickiness in services prices.

The faster drop in inflation coupled with the expected…