The British pound continues to surge today against its US counterpart, following on from yesterday’s gains on the back of booming inflation figures which has raised speculation that an interest rate hike from the Bank of England could come any time now.
At 6.51am (GMT) the British currency was trading at $1.3303, up from $1.3287 in yesterday’s close.
The pound has now jumped nearly 1.5 cents in the last 2 trading sessions on the back of CPI figures from the UK, which hit the market at 2.9 percent against analysts’ expectations for a figure of 2.9 percent and up from 2.6 percent last month.
The news sets the stage for a big show on Thursday when the Bank of England sits down to announce their latest interest rate decision, and although no changes in rates are expected, the mood to lift rates in the following months amongst BOE board members may increase which may drive the pound higher.
“While we doubt that a rate rise is on the cards for later this week, we believe that there is a chance that the vote split could signal a hawkish shift at the bank, with the potential for Chief Economist Andy Haldane to vote for a rate hike,” said Kathleen Brooks, research director at City Index.
Today’s wage growth figures released from the UK may also create some volatility in the pound as they are also connected with rate hikes though it seems the pound will hold onto its gains until Thursday’s rate decision.
“Tomorrow’s labor market data, especially wages, could either challenge or confirm the move we’ve seen today,” he said. “However, ultimately the real decider for sterling is likely to be how much tolerance for inflation the BOE signals on Thursday” said Ranko Berich, head of market analysis at Monex Europe.
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