Currency Note Sterling

Sterling falters as the threat of imminent interest rate rises recedes

By Ricky Bean July 24th, 2014

Early morning trading saw sterling hit a fresh 23-month high against the euro as it strengthened ahead of the release of the latest Bank of England minutes. However, after the release sterling ended up having a difficult day as it lost ground across the board as the minutes showed that policy makers were less eager to raise interest rates than anticipated. The minutes reflected concern that an early interest rate hike could impact the strength of the economic recovery in the UK. With Governor Carney also re-affirming his view that poor wage growth suggested more slack in the labour market than previously thought, sterling did not receive the positive boost that many economists had predicted. This saw sterling fall to a three-week low against the US dollar, with investors awaiting evidence of a broad-based recovery for the UK economy.

Evidence of this could be seen in today’s retail sales figures. After contracting throughout May, these are expected to show a modest increase throughout June. However, a better-than-expected figure could see sterling recover somewhat from yesterdays disappointment.