24 June 2014

Sterling pumps as England are dumped

As England suffer an early exit from the World Cup in Brazil, the pound is delivering a much more upbeat performance.
​​​​​As England suffer an ‘early’ exit from the World Cup in Brazil, the pound is delivering a much more upbeat performance.
 
While the football team underwhelms, the UK economy continues to show improvement and raises the prospect of an interest rate hike sooner rather than later.
 
Expectations the Bank of England will tighten before the year is out is driving sterling to fresh five-and-a-half year highs against the dollar. Cable is holding gains above the key $1.70 level and it seems the only way for sterling is up as investors get increasingly bullish.
 
Minutes from the bank’s latest policy meeting revealed a hawkish stance: “The relatively low probability attached to a bank rate increase this year implied by some financial market prices was somewhat surprising.”
 
Mark Carney had earlier warned that rates could rise “before markets currently expect”. The Bank of England’s new chief economist, Andrew Haldane, favours an early increase to ensure the path to normalisation is gradual.
 
All the signs point to a rate hike this year, which would see the UK be the first major economy pursuing an easy money policy to finally tighten.
 
What are your thoughts on Sterling? Trade GBPUSD as spot, forward and as an option today. 

 
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