Sterling exchange rates have been taking a bashing over the past few weeks and so far as this trading week has progressed we are yet to see any major change in momentum.
When Theresa May announced that she would be calling a snap election the Pound rallied, but as doubts that she would have an easy ride started to creep into investors minds, we have seen the Pound suffer and so far it hasn’t pulled many punches in its fightback.
Earlier in the week we did find out that inflation is still sitting at 2.9% which is starting to creep worryingly above the Government target of 2% and one way to start to dampen this back down again would be to raise interest rates.
As it stands we only have one member of the Bank of England that is in favour of raising interest rates in the U.K but this latest inflation release may lead to more changing their mind.
Tomorrow we have the release of the Bank of England interest rate decision at midday and although I doubt we will see an actual change in rates, any hint towards a future interest rate hike may be seen as very positive for the Pound.
A higher interest rate generally makes a currency more attractive to investors and the market also will price in speculation that a change is likely to happen, so should we have news that another member of the Bank Of England are now in favour of that happening then we could finish the day with a stronger Pound than what we started with.
The U.K and indeed the Pound is in desperate need of some good news, as lately all we have received is more and more uncertainty along with a gloomy economic outlook.
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