Encouraging comments from Bank of England (BoE) Governor Mark Carney on Tuesday helped sterling reverse many of the losses seen last week, as confidence grows that we could see an interest rate hike in the UK early next year.
This followed a quiet start to the day, as inflation in the UK fell, as expected, to 0% for June. Although this represents a contraction compared to last month, this still kept the UK above the more troublesome negative inflation boundary. Market reaction to this was muted, with investors awaiting the BoE inflation report hearings later in the morning. These did not disappoint, with BoE Governor Carney, along with other policy makers, confirming that current economic conditions in the UK have caused the monetary policy committee to raise the question of when to raise interest rates. Sterling pushed higher across the board on the back of this news, and with both the European and US central bank heads speaking today, any weakness seen in these statements could see sterling make further gains.