The pound reached fresh highs yesterday as traders continued to bet on another interest rate hike from the Bank of England at its meeting on Thursday.
Sterling edged up to as high as $1.266, its highest level in a year and adding to gains last week.
Markets predicted the UK’s central bank will have to continue to raise interest rates due to stubbornly high inflation, which is currently running at just over 10 per cent.
Gains: Sterling edged up to as high as $1.266, its highest level in a year and adding as markets predicted the UK’s central bank will have to continue to raise interest rates
The ongoing squeeze on consumer spending has prompted speculation the Bank will raise interest rates by another 0.25per cent percentage points to 4.5 per cent this week.
Markets are also predicting rates could peak at 5 per cent later this year, piling more pressure on mortgage payers and borrowers.
Andrew Goodwin, chief UK economist at Oxford Economics, said the Bank of England could ‘justifiably argue’ that rates would need to rise further due to the UK’s ‘tight’ labour market and ‘stubbornly high’ inflation.
