LONDON (Reuters) – The pound posted a fifth weekly gain against the euro on Thursday, reaching its highest level in almost two years against the single European currency that has been rocked by political uncertainty in France.

This week, the euro fell to the lowest level against the pound since overdue August 2022, after the success of far-right parties in the weekend’s European Union general elections prompted French President Emmanuel Macron to order early voting in his country, spooking investors.

The pound was already on an upward trend against the euro, which has already gained almost 2.5% this year, largely based on expectations that UK interest rates will remain higher than eurozone rates for some time.

On Thursday, sterling was last unchanged against the dollar at $1.2798 and stable against the euro at 84.44 pence.

Wednesday’s data, which showed US inflation fell faster than expected in May, triggered a sell-off in the dollar, strengthening sterling by 0.5%. The sell-off slowed after the US Federal Reserve released its projections for interest rates, economic growth and inflation.

On Thursday, the pound showed little reaction to the opposition Labor Party’s manifesto, published ahead of the July 4 general election.

This week’s data painted a rather stagflationary picture for the UK economy, with wages still rising rapidly, while economic growth came to a complete standstill in April.

Traders expect at least one interest rate cut from the Bank of England this year, but the jury is out on whether there will be a second one.

The BoE meets next week. Futures markets currently show investors assessing a 75% chance of a cut by September, with the cut fully priced in for November.

“With market prices already so hawkish, there is a risk of more market reaction if the BoE appears relatively indifferent to recent strong data. We continue to expect two BoE cuts this year in August and November,” Nomura economists led by George Buckley said in a note.

Meanwhile, the pound is systematically gaining in value. So far this year, it is the only major currency to be in positive territory against the dollar, up 0.5%. The closest rival is offshore, which weakened by 2%.

On a trade-weighted basis, the pound has reached its highest level since the Brexit vote in June 2016.