The Great Pound posted an impressive advance for the second day today as more and more policy makers are starting talking about necessity of the interest rates increase to suppress the accelerating inflation.
Martin Weale, the policy maker at the Bank of England, said that there is a “powerful case” for a “modest rise” in the interest rates. The inflation in the UK accelerated to 3.7 percent in December, significantly exceeding the central bank’s target of 2 percent. The central bank’s Governor Mervyn King stated that the surge of the inflation was just temporary, but most analysts believe that the central bank would be required to raise the rates to tame the inflation. The sterling gained as a result of such outlook.
Yet some analyst, like the senior currency strategist at BNP Paribas SA Ian Stannard, remained quite pessimistic about Britain’s currency. Stannard said:
Rate hikes in the U.K. have already been priced in and the market realizes it will be difficult for the recovery in the pound to continue given the weakness of the economy.
GBP/USD traded near 1.6052 as of 02:07 GMT today after it rallied yesterday from 1.5831 to 1.6012. GBP/JPY traded at 131.71 after yesterday’s advance from 130.03 to 131.34.
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