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: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
“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
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