Tuesday was a positive day for sterling which saw it push close to recent highs against both the euro and US dollar as confirmation that Theresa May will take over as Prime Minister continued to buoy markets. Sterling gained nearly three cents against the US dollar on Tuesday, adding to the previous day’s gains when Andrea Leadsom pulled out of the campaign to become Conservative leader. The gain against the euro was also significant. Sterling did come under some pressure as Bank of England (BoE) Governor Mark Carney was forced to defend his the central bank’s dire warnings on the effect a Brexit could have on the UK economy.
Little in the way of economic data is expected today, but sterling could find itself under some selling pressure ahead of the BoE’s latest interest rates decision tomorrow. With a consensus opinion that we are likely to see an interest rate cut in the near future, investors will be awaiting this announcement with anticipation and perhaps some trepidation as we could see some additional quantitative easing also brought into play. In theory, both of these outcomes should weaken sterling but in these difficult times decisive action may be viewed as a positive. We will fine our tomorrow around mid-day.
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