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BoE rate increase expected to be 0.25%

BoE rate increase expected to be 0.25%

Sterling bounced off the 1.3000 mark against the dollar yesterday as firm labour-market data provided support. Better risk appetite helped underpin the Pound, commodity currencies registered further gains and Euro short covering (buying) faded. Sterling settled around 1.3030 to the Dollar for most of the day and the Euro retreated to 1.1920.

The market now has very strong expectations that the Bank of England will increase interest rates by a modest 0.25% on Thursday, whereas a 0.5% increase would drive demand for the Pound. This evening’s US interest rate decision will dominate today, but there will also be Sterling position adjustments ahead of the UK interest rate decision tomorrow. 

The Pound opens near 1.3065 to the Dollar in early Europe with the Euro around 1.1905. Volatility will spike later in the day and Fed policy and risk conditions are crucial to trading directions.

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