By: Barbara Zigah
Yesterday’s report that U.K. inflation continues to exceed the Bank of England’s 2% target rate gave some credence to investor speculation that a rate hike might soon be forthcoming. As a result, the Pound Sterling came under significant selling pressure. Today however, Sterling managed to hold onto broad gains, rallying to a 5½ month high versus a basket of currencies. Against the U.S. Dollar, as reported at 2:37 p.m. (JST) in Tokyo, the Pound was trading at $1.6155, slipping back from the $1.6172 peak struck on Tuesday; against the U.S. Dollar, the Pound has appreciated nearly 3% since the beginning of the year.
Later today, the Bank of England’s governor, Mervyn King, will be holding a press conference, the focus like to be the Bank’s next move to control inflation. Some analysts are predicting that King may caution the markets on the possibility of future rate hikes, perhaps by as much as 75 basis points by the year’s end, but markets have already priced in that probability.
The Swiss Franc also traded higher against the common currency Euro at $1.3007 Swiss Francs, following a media report that the central bank of Switzerland would consider normalizing rates depending upon the outcome of their inflation forecast.