Sterling Exchange Rates Before Bank of England Meeting (James Lovick)

pound feels the weight of political uncertainty as the election campaign commences

The pound may see a volatile day after the releases of the latest Bank of England interest rate decision this afternoon. Although expectation is for no change in interest rates today there is a growing feeling that the central bank may begin to indicate a tighter policy going forward. Any indications from Bank of England Governor Mark Carney that there will be an interest rate rise later this year could see the pound rally against most of the major currencies including the Euro and US dollar.

The detail will revolve around what the forecasts for inflation look like. Any increase in projections that remain above 3% could force the Bank of England to take action and raise interest rates. There has been an expectation that the first hike would come in the Autumn of 2018 although this could be brought forward to the first half of this year. Any change like this is likely to see a boost for the pound. Clients looking to buy Euros or buy US dollars may want to position themselves ready for a potential spike higher today. The pound has slipped from the recent highs against the Euro and US dollar over the last two weeks although any change in strategy from the Bank of England today could see a boost for sterling exchange rates.

Brexit negotiations which have resumed this week are also playing a considerable role for the price of sterling. With British government cabinet meetings taking place this week to devise a final strategy with Brexit there are likely to be more developments in the media which may also direct the price of sterling.

The Euro may alos begin to see a boost after German Chancellor Angela Merkel has finally agreed the terms of a second Grand Coalition with the Social Democrats. Finally having some political stability in the Eurozone’s powerhouse is likely to help reinforce both the Eurozone and the single currency.

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