GBP: sterling’s rallying continues as we approach Thursday’s BoE meeting

With no major economic data releases yesterday, market attention was turned to events elsewhere. Eurozone Gross Domestic Product (GDP) and France GDP releases showed that the UK still lags behind in terms of economic recovery, but traders seemed to take little notice, given the performance of sterling.

Indeed, the pound has enjoyed a recent rallying against the euro and US dollar as expectations of an interest rate rise on Thursday continue. The markets have priced in a rate increase and, in many ways, Governor Mark Carney and the rest of the Monetary Policy Committee’s hands are tied – if they were to leave rates on hold, the pound would weaken. It seems the question isn’t so much whether rates will increase, it is more what the voting split will be.

Today we have the Nationwide house prices release. They are forecast to jump to 2.2% from 2.0% on an annual basis and remain at 0.2% on a monthly basis. However, the main release is the Markit manufacturing purchasing managers’ index figure which is expected to be slightly higher than it was last month.