Sterling held steady over the weekend and into Monday following a month in which it has experienced uncharacteristic weakness against a handful of other major currencies. It made small gains yesterday against the euro, while seeing very little movement against the US dollar.
A major driver of sterling strength or movement today is likely to be the investors positioning themselves ahead of the Bank of England (BoE) inflation report and the address from Governor Mark Carney on Wednesday. Carney has been clear in stating that increases in interest rates will be slow and gradual; however, we are still unclear on when exactly these rate rises will begin. Future interest rate increases have been a key factor in causing sterling’s rise over the last 12 months and some are now moving to the opinion that this is fully priced into sterling and further delays will cause a reverse in the trend. Any indication on Wednesday as to when the first interest rate hike might occur is likely to have a strong effect on sterling performance.