Currency Note Sterling

Will sterling’s joy last longer than a day?

By Smart Currency November 20th, 2014

Sterling advanced across the board yesterday as minutes from the latest Bank of England (BoE) meeting showed concern among some policy makers over potential inflationary pressure. Following the downbeat mood of the BoE quarterly inflation report last week, sterling had continued to fall amid expectations that the vote split could return to 8-1 in favour of keeping rates on hold. Instead, the votes remained split at 7-2 while a number of policy makers highlighted signs that wage growth was picking up. If wage growth were to take up slack in the UK economy sooner than expected, it would increase pressure on the BoE to raise interest rates sooner than expected. This reference to spare capacity in the UK economy took investors by surprise and allowed sterling to regain some ground against both the euro and US dollar throughout the day.

Today sees the release of retail sales data from the UK which provides a keen insight into overall economic activity. Following a disappointing contraction in September, this is expected to have rebounded in October as consumers prepare for the Christmas period.