Sterling exchange rates have weakened during the European morning session on the back of news that the chancellor George Osbourne has increased a tax on banks.
The session had started off positively for the pound on the back of positive retail sales figures for Jan on a YoY bases and RICS released their house price balance for Jan which too showed signs of strength.
Sterling exchange rates have fallen against 14 of its 16 most-actively traded currency pairs when the Chancellor’s comments hit the market. The increased tax on banks will raise an extra 800 million pounds a year for the UK.
On the back of the comments the pound has been heavily sold off as the UK economy is heavily dependanton the financial sector and anything that adversely effect it will have a cost for sterling exchange rates. It seems that markets have got far to carried away with the prospect of an interest rate rise in the near term and it would not surprise me to see the pound weaken further if there is no interest rate rise this Thursday.
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