The Bank of England have announced earlier today that they may be gearing up to increase interest rates in the UK if the economy continues to show signs of positive growth combined with increased inflation levels. The Pound hit its best level to buy Euros all week following the announcement and subsequent press conference but we have since seen the market fall back to levels where it started at this morning.
The original expectation prior to the meeting earlier today was that interest rates may rise next in November 2018 but some predictions are that it could now come as early as May which is why the Pound was given a boost.
If interest rates go in an upwards direction this typically helps to strengthen the currency involved. The minutes from the Bank of England’s meeting has noted that the global economy is improving and that the UK is also improving, hanging on the coattails of global growth. With the US Federal Reserve having raised interest rates three times during 2017 we saw the US Dollar stay strong against the Pound, so if the Bank of England start to think about raising rates, could this have a positive effect for Sterling during the course of this year?
The Bank of England has increased its growth forecast for the UK’s economy this year from 1.5% to 1.7% and although we have a lot of uncertainty owing to the ongoing Brexit talks, if growth continues then I think it will only be a matter of time before the UK looks at raising interest rates.
The market rose very quickly earlier but has started to calm down which highlights the importance of keeping a close eye out on exchange rates particularly when we have such a big event.