Of course on going Brexit negations will continue to have a significant impact on the pound, however the key release for sterling will come on Tuesday morning with the release of UK inflation figures at 09:30
Recently Mark Carney and the Bank of England (BofE) have hinted at the need for an interest rate rise due to due to rising inflation. Indeed if the core inflation figures, in the form of Consumer Price Inflation, reaches 3% or more, Mark Carney has to write a letter to the Chancellor explaining why levels have increased significantly above the BofE of target level of 2%.
What impact will an interest rate rise have?
Tuesdays figures are forecast to reach this 3% level, an increase on the previous month of 2.9% - should this occur will we see a rate rise? Some have suggested the Bank of England have simply been hinting about a rate rise to give sterling a much needed boost and would argue due to stagnating wage growth the economy could not handle a rate rise, however the Central Bank cannot keep hinting at a rate rise without having to act at some point.
Should they keep hinting but not raising then Mark Carney and the Bank of England's credibility may come into question. For this reason Tuesdays figures are key and should we see 3% or more then the Bank of England may have no choice but to raise rates. A move to 3% on Tuesday and I would expect sterling to see a push towards 1.14 against the Euro and 1.34 versus the US dollar. Of course should inflation levels remain flat or fall then sterling could be set for a tough day. Either way expect volatility tomorrow morning,
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Labels: Bank of England, BofE, consumer price, Dollar, GBP/EUR, Inflation, Interest Rates, Sterling