Interest rates drive Sterling exchange rates today

The pound has had a rocky ride fluctuating by nearly a cent against the US Dollar and 3/4 of a cent against the single currency.

The markets have been driven today by interest rate decisions in the UK and the Euro zone. First up at 12.00pm the Bank of England’s MPC unexpectedly decided  to keep the base rate of interest at hold at 0.5% straight after the decision the pound lost some ground against most majors as there was a slight chance of a 25 basis point hike. The minutes to the decision in two weeks time could be key to the pound for some information on future rate decisions.

45 minutes later it was the turn of the ECB with their rate decision. They to followed expectation and raised interest rates to 1.25%. This was the first rate hike since 2008. There was not an enormous amount of movement straight away but Jean Claude Trichet is speaking now and it could lead to further knowledge on their stance for the future.

It is expected that the rates in the Euro Zone could be hiked a couple of times again this year and this could force the pound down to 1.11-1.12 over the coming weeks.