Sterling reached 2-month highs against the US dollar and 18-month highs against the euro yesterday as our domestic currencies bullish momentum continued in the markets. Investors remain focused on today’s inflation report which is expected to show a 3.2% increase in prices of goods and services. This report will inevitably have a direct impact on policy outlook from the Bank of England and potential interest rate hikes. Markets are pricing in a couple interest rate hikes before year end and several in 2022.
The broad-based selling pressure surrounding the US dollar and the BoE rate hike expectations ahead of UK CPI data fuel the pair’s upside, pushing above 1.38. Over the weekend, BoE Governor Andrew Bailey argued that they will have to act to contain inflation and inflation expectations – fueling further expectations of a rate hike sooner than later.
Have a great day.
Author: William Jones, Senior Relationship Manager.
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