Tomorrow could be a real turning point for the Pound breaking through half year highs. Specifically, if the rate was to move up just another cent it would be back to levels last seen in May. The positive movements over the last week have been attributed to two things, the Catalonia crisis and the belief that the Bank of England will raise interest rates.
There is thought to be an 84% chance of a interest rate hike tomorrow and an execution of this stat is set to help Sterling just jump that little bit. There is an obvious concern that if the Central Bank choose to not raise rates then there could be a major fallout and I wouldn’t be surprised if Sterling has one of its biggest losses since Brexit.
Considering the uncertainty surrounding the Catalonia situation and how they’re going to resolve the problem, the Euro could continue to come under pressure. Come 1:00pm tomorrow the next few months of Pound Sterling rates could be determined. The GBP/EUR exchange rate has been range bound for the last 2 months staying between 1.10 and 1.14. The jump to 1.145 today did match the last high in September providing real optimism that before the Bank of England’s rate decision the markets this high.
If you have been waiting to buy Euros with Sterling then being ready to press the button tomorrow could be key. After the decision Bank of England Governor Mark Carney will speak, providing his thoughts on the latest decision and how he sees the UK economy fairing in the future. The central bank has arguably been forced into raising interest rates if they choose to do so. Inflation has been rising following Brexit and the fallout of that could now end up with the rate hike tomorrow.