Sterling jumps higher after the Bank of England releases its latest quarterly inflation report
"Sterling made broad gains this morning after the Bank of England released its updated forecasts on economic growth and inflation in the U.K. for the next two years. There were no major surprises in their forecasts, though it was mentioned that there is a chance inflation will reach 5% at some point this year, and that it will remain above the 2% target throughout 2012. This, plus their slightly more upbeat stance on economic growth has caused market expectations for an interest rate rise to be brought forward from January next year to December this year. In turn we have seen a Sterling high against its major peers.
"Today's report, whilst far from revelatory has perhaps got some economists and forecasters to revisit just how negative they are on the U.K. economy. Similar to most of Europe and America, growth has continued. Whilst compared to the years prior to the financial crisis the economy remains depressed, recovery is as expected following a historically devastating banking crisis. When trying to understand currency movements it's important to look at economic data in relative terms. There is an argument that there is a lot of bad news priced into the value of Sterling, and not enough in the value of the Euro. This has been highlighted by the recent 4% drop in the value of the Euro against the Pound and the US Dollar, in less than a week, after a less hawkish statement from the ECB and concerns over Greek debt!
"Sterling gained just over of 1% to 1.15 against the Euro and a similar amount against the US Dollar to 1.65 following the report and the press conference".
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