The pound has been steady ahead of Thursday's expected rate rise, but for an index packed with overseas earners, the Exchange Rate is never just a sideshow.

On Monday 2 November 2026, sterling was changing hands at about $1.3417 and around 83.53p per euro, according to Reuters. Those numbers might seem a quiet detail in a week dominated by interest rates, oil and corporate results. For the FTSE 100, though, the exchange rate quietly shapes how investors read almost everything else.

Reuters described sterling as drifting while the Bank of England's decision came into focus. The Monetary Policy Committee is widely expected to raise Bank Rate by 25 basis points from 3.75% to 4% on Thursday 5 November, which would be the first increase since August 2023. Money markets had fully priced four quarter-point hikes by next September, according to LSEG data cited by Reuters. How the pound behaves after the announcement could matter considerably for London's largest companies.

Why the pound and the FTSE 100 are intertwined

The FTSE 100 is often described as a global index that happens to be listed in London. Many of its constituents generate a large proportion of their sales and profits abroad, in dollars, euros and other currencies. When those Earnings are converted into sterling for reporting or for valuing the shares, the exchange rate makes a difference.

In broad terms, a weaker pound tends to flatter the sterling value of overseas earnings, because each dollar or euro converts into more pounds. A stronger pound does the reverse. That is why the FTSE 100 has sometimes moved in the opposite direction to sterling, while more domestically focused indices such as the FTSE 250 can respond differently.

For illustration, imagine a company earning €1,000 of profit abroad. At 83.53p per euro, that converts to £835.30. If the pound strengthened so that a euro bought fewer pence, the same €1,000 would translate into fewer pounds, even though the underlying Business performed identically. The figures here are hypothetical and simply show the mechanism.

Translation is only part of the story. Companies that buy raw materials or pay staff in one currency while selling in another also face transaction effects, and many use hedging to smooth those swings over time. That is why the same exchange rate move can affect two FTSE 100 businesses in quite different ways.

Interest rates and the currency

Interest rate expectations are one of the main forces that move a currency. In general, when a Central Bank is expected to raise rates, holding that currency can become more attractive to international investors, because returns on deposits and short-term bonds improve. That can support the exchange rate.

The relationship is not mechanical, however. Much depends on what markets already expect. With four hikes fully priced, a single 25bp rise on Thursday may already be reflected in sterling. A surprise could come from the tone of the Bank's guidance instead. ING, for example, expects a follow-up hike in February but argues that pricing for further increases "looks extreme." If the MPC signals a shorter cycle than markets anticipate, sterling could soften; a more hawkish message could have the opposite effect.

There is also the question of why rates are rising. ING has argued that the worsening energy crisis leaves the Bank with little room to stay on hold. When tightening is driven by an energy shock rather than domestic growth, currency markets can weigh the Inflation risk against the potential damage to the economy, which can make the pound's reaction harder to predict.

Currency in Tuesday's company results

Two of Tuesday's FTSE 100 reporters show how currency effects appear in practice.

Coca-Cola Europacific Partners (LSE:CCEP) reports in euros. Its third-quarter Revenue rose 6.5% on a reported basis to €5,764m, compared with growth of 5.8% on a currency-neutral basis. The gap between those two figures reflects the effect of exchange rate movements on the period's results. The shares nonetheless fell 2.1% in London after the company flagged cost pressures.

Hiscox (LSE:HSX) reports in US dollars. Its group insurance contract written premiums rose 9.5% on a reported basis to $4,437.2m for the nine months to 30 September, against 8.1% in constant currency. Again, the difference between reported and constant-currency growth shows currency at work. Hiscox shares rose 2.9%, after opening at 1,935p, up 2.8%.

For a UK-based investor, both companies add another layer: their share prices are quoted in London, but their reported results are in other currencies. Movements in sterling against the euro and the dollar can therefore influence how those results are perceived.

Beyond those two companies, the FTSE 100 closed on Tuesday 3 November at 10,638.43, down 122.90 points or 1.14%, its steepest one-day fall in a month according to Reuters. The FTSE 350 banks index fell 1.6% ahead of the rate decision, with HSBC (LSE:HSBA) down 2.0% and the biggest approximate drag on the index in points terms. Miners were also weak as copper fell to a multiweek low.

Currency is one of several threads running through that sell-off. Elevated oil prices, which Reuters said have fuelled inflation fears and prompted many central banks to raise rates, feed into both rate expectations and exchange rates. Brent settled on Monday at $104.77 a barrel after a 7.63% drop. Eurozone inflation figures on Wednesday, expected at 3.9%, and the US October jobs report on Friday could also move sterling against the euro and the dollar respectively.

Key dates to watch

Wednesday 4 November:Eurozone inflation figures, expected at 3.9%, relevant to the pound against the euro.

Thursday 5 November:Bank of England MPC decision, with a 25bp rise to 4% widely expected.

Friday 6 November:US October jobs report, with implications for the dollar.

Thursday 12 November:ONS first quarterly GDP estimate for July to September 2026, at 7:00am.

The bottom line

Sterling's steady level near $1.34 ahead of the MPC meeting belies its importance to the FTSE 100. Because so many constituents earn in dollars and euros, the exchange rate influences how their results translate and how investors value them. Thursday's expected rise, and more importantly the guidance accompanying it, could nudge the pound one way or the other. Tuesday's numbers from CCEP and Hiscox show that the gap between reported and currency-neutral growth is a detail worth reading closely.