Pound/Euro rates staged a slight recovery yesterday, rising to €1.14 due to higher than expected inflation figures. The gains have not lasted however and levels have already dropped into the €1.13’s again. This is due to the fact that despite inflation rising, the Bank of England are unlikely to move interest rates for fear of slowing the economy further. Wage growth figures this morning also showed that wages are rising much slower than prices, which means consumers are being squeezed and that’s not helped Sterling either.
Central Banks and Interest Rates
This evening the US Federal Reserve are widely predicted to raise interest rates to 0.25%. If they do it might strengthen the USD and pull GBP/USD rates lower. It’s probably priced in to a certain extent already though due to the fact it’s almost certain to happen.
Tomorrow, the Bank of England announce their decision, but if they move rates I will eat my hat! They have said rates will stay low for the foreseeable future. The Governor Mark Carney gives a speech later in the day, and his comments could move the Pound depending on what he says. If he is positive about the economy and hints at reducing their Quantitative Easing measures, it could help the Pound.
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