The UK Pound has been on a tear recently, both against the
USD and more surprisingly, against the Euro. The currency has been given a boost by the
Bank of England’s reluctance to cut its benchmark interest rate, which at
5.75%, remains the highest among the world’s major currencies. However, many economists feel the case for a
rate cut is growing stronger every month, whether or not the Bank of England is
willing to acknowledge it. Inflation is
only moderately high, while the fall in housing prices-exacerbated by a prolonged
period of tight money-threatens to drag down the entire economy. The markets are still pricing in a rate cut by
year-end, which would surely drag down the Pound should it obtain. Dow Jones Newswires reports:
“We strongly suspect that market pessimism in this respect
will continue to grow, in reverse proportions to its expectations of a further
hike in U.K. interest rates,” said…a senior currency strategist.
Read More: Sterling’s Strength Can’t Last Much Longer
Original post by Jimmy Atkinson and software by Elliott Back
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