Pound to euro live: Sterling on edge ahead of inflation and interest rate signals | City & Business | Finance

Sterling was steady at 1.100 against the euro and 1.299 against the US dollar as markets await key updates on the UK economy.

Inflation as measured by Consumer Prices Inflation (CPI) hit 2.9 per cent in May, before falling back to 2.6 per cent in June.

If it has jumped back up in July, an base rate rise from the Bank of England may come sooner rather than later, as raising rates helps to keep the cost of living in check.

Policymakers try to keep inflation running at around two per cent. 

Employment figures later this week – particulary wage rises – will give another insight into the economy and signal when the Bank of England will raise rates.

If it looks more likely that policymakers will raise rates, the pound is likely to strengthen against the euro and the US dollar.

In August policymakers kept the base rate on hold at 0.25 per cent and downgraded expected economy growth in 2017.

Governor Mark Carney forecast that interest rates will rise in 2018 and the pound weakened after the update.

Sterling will likely strengthen if there are signs that monetary policies could tigheten sooner rather than later.

Tensions between North Korea and US president Donald Trump have also calmed, allowing traders to focus on economy data. 

But experts warned the threat of nuclear war could rock markets if the two sides again become agitated.

Craig Erlam, senior market analyst at Oanda, said: “The war of words between the two countries weighed heavily on risk appetite for much of last week and despite today’s bounce, it will continue to pose a threat in the days ahead.

“What we’re seeing today is relief at the situation not deteriorating over the weekend, something traders were clearly wary of towards the end of last week.
Still, given the unpredictability of those involved, traders are likely to remain on edge and I don’t think it will take much for the safe haven rush to resume.

“In the meantime, we’re seeing a small unwinding of those risk aversion trades, with Gold trading slightly  lower and the yen and Swiss franc off against the dollar, pound and euro.”

More to follow…

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