The British pound is closing in on its 3 month low despite the fact that inflation expectations hit the highest level in 15 years. Central Bank governor, Mervyn King attributed the rise in inflation to rising commodity prices
BoE officials are keeping a close watch on the wage rate, for indications of future inflationary pressure. Speculations rise that the BoE would soon be hiking their key interest rate in order to sustain the economy from inflation, however it remain to be seen if Mervyn King would be quick to react, as the economy experiences slowing growth. Due to lack of economic data, investors look forward to next week when consumer prices and retail sales are due for release. In addition, markets will be paying a lot of attention to BoE minutes, in order to attain a clear understanding of central banks sentiment. For the time being, the pound is weak against the dollar and the US CPI report will dictate how the GBP/USD trades over the next 24 hours.