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Sterling keeps up ahead of inflation report

The Bank of England’s monetary policy hinges on a positive Brexit outcome while wages and inflation continue to rise.

Pound breaks above 1.30 against Dollar

As the UK government grapples with political turmoil, wages have continued to rise in the UK, putting additional pressure on the Bank of England (BoE) to raise interest rates sooner rather than later.

Meanwhile, the Pound had the worst performance since August 2018 against the greenback after the draft Brexit proposal sparked several ministerial resignations. This had a positive impact on UK sovereign bonds, with money markets suggesting that the chances of an interest rate rise in 2019 were shrinking. It is another sign investors are concerned over the impact a “no-deal” Brexit will have on the UK economy and with that the BoE’s monetary policy.

In the US, despite robust economic growth, the housing market is showing signs the expansion could have peeked. Should the slowdown in the number of new builds continue then I expect the US Dollar will weaken.

Focus today turns to the Treasury Committee’s inflation report due to be released at 10:00 (GMT).

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