Sterling Unable to Hold onto Gains
Sterling recovered yesterday morning as the currency markets took note that other major economies were facing problems surrounding soaring energy prices as well. The Pound peaked around 1.3730 to the dollar before fading while the Euro retreated to near 1.1725.
Bank of England Governor Andrew Bailey commented that the economic recovery had slowed down, that an interest rate rise will be required to stem rising inflation but that the economy is not yet strong enough. He added that interest rates could rise before the end of the asset-purchase programme which maintained speculation that rates could be increased this year.
Sterling opened above 1.3700 to the dollar this morning on hopes of a rate rise this year and the Euro opened little changed at 1.1723. However, since market open sterling has lost ground again against its US and European counterparts.
The British Pound could advance recent gains made against all the major currencies, with analysts saying the gains are linked to fears the UK is about to see a surge in inflation levels that outstrips those seen in other markets.
The Pound’s rally looks to be sympathetic to an ongoing rise in UK bond yields: while bond yields are rising in most major markets they have risen just a little faster in the UK which is typically a supportive development for a currency.