Sterling has increased against both the Euro and the US Dollar owing to the Bank of England’s interest rate decision which came out at midday.
Out of the nine members of the Monetary Policy Committee Kristin Forbes has concerns over rising inflation and has voted to raise interest rates.
This is the first time since last summer that the Bank of England has not been in full agreement and this has caused Sterling to rise against all major currencies.
Indeed, BoE governor Mark Carney has suggested that one of the dangers that the UK is facing is rising inflation and with unemployment data coming out strong this week at its lowest level in over 30 years we could see a change in appetite for a rate hike in the UK at some point in the future.
The current expectation is for a UK rate hike by next year but with today’s announcement this could come sooner. Therefore, this is the reason for today’s moderate spike in value for the Pound
The US Federal Reserve voted last night to increase interest rates and although this would typically strengthen the US Dollar the rate hike was already predicted to happen with a 98% chance.
The accompanying press conference suggested that although we might see another two rate hikes the pace of this will be monitored and therefore we have seen the US Dollar weaken against the Pound.
However, although the Pound has found support today I still think that the issue of Article 50 will cause problems for Sterling exchange rates
If we rewind back to last June we saw huge losses for Sterling and although I don’t think we’ll see the same amount of movement I think the Pound will be in for a difficult next two weeks when Article 50 should be triggered.
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