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Dollar Strengthens As Rate Increases Expected

Dollar Strengthens As Rate Increases Expected

A  YouGov survey revealed UK one-year inflation expectations rose to 4.8%, double the long-term average and the highest reading since the survey started in 2006: Further evidence to support Bank of England concerns that expectations will move higher and increase upward pressure on wages.

Risk appetite allowed the Pound to maintain a strong tone during the day, and the Euro retreated to just below 1.1975 and moves above 1.3500 to the dollar hit selling interest. The Euro drifting lower against the dollar amid Ukraine concerns and an underlying lack of bond yield support. The only political developments were discussions of ambushes involving baked goods. 

The dollar strengthened after Fed Chair Powell’s comments and risk appetite also dipped which pushed Sterling to the 1.3450 area. Expectations of Bank of England rate hikes were offset by stronger expectations of Fed rate increases. 

Sterling opens this morning around 1.3430 to the dollar and the Euro around 1.1975. Markets will continue to monitor political/cake developments, although risk conditions are likely to have a more substantial currency impact.

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