Forex Blog: Currency Trading News & Analysis.

October 12th 2007

UK Pound Nears Plateau

The UK Pound has been on a tear recently, both against the USD and more surprisingly, against the Euro.  The currency has been given a boost by the
Bank of England’s reluctance to cut its benchmark interest rate, which at 5.75%, remains the highest among the world’s major currencies.  However, many economists feel the case for a rate cut is growing stronger every month, whether or not the Bank of England is willing to acknowledge it.  Inflation is only moderately high, while the fall in housing prices-exacerbated by a prolonged period of tight money-threatens to drag down the entire economy.  The markets are still pricing in a rate cut by year-end, which would surely drag down the Pound should it obtain.  Dow Jones Newswires reports:

“We strongly suspect that market pessimism in this respect will continue to grow, in reverse proportions to its expectations of a further hike in U.K. interest rates,” said…a senior currency strategist.

Read More: Sterling’s Strength Can’t Last Much Longer

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