020 7898 0500A strong week for sterling has seen it hit five year highs against the US dollar, whilst holding close to eighteen month highs against the euro, although some ground was lost to the single currency. The key to sterling strength is the belief that we will see the UK increase interest rates this year thereby increasing the differential in interest rates with the euro and the US dollar. This belief was undermined slightly by the lower than expected UK inflation figure, the minutes of the last Bank of England meeting which were less hawkish than expected and disappointing UK retail sales data.
With very little economic data of note set to be released today, sterling can be expected to end the week positively and even though not all economic data points to an interest rate rise, the belief that it will happen this year is enough to underpin sterling for the time being.
