British Pound: One More BoE Rate Hike This Year?

Like the Euro, the British pound has held up very well against the US dollar. Consumer confidence hit a one year high in the month of May while wage growth neared its 7 year high.

Collectively, these numbers suggest that we could see strong retail sales in the month of May, which would pave the way for another rate hike by the Bank of England this year. The futures curve is fully pricing in one rate hike with a slim but growing possibility of two hikes. We will not likely see the rate hike tomorrow however since they just raised rates in May. Even though the economy remains strong, they do not want to be the ones to push the GBP/USD above 2.0. When they leave interest rates unchanged, no statement is released, but here?s a word of caution: when it comes to the Bank of England, traders should not rule out anything since they are a central bank that is notorious for catching the market off guard.

Mark Carny has given forward guidance, that there will be no interest rates rises until 2016. he has linked interest rate rises to the unemployment rates. Also an interest rate rise this year is in my view unlikely, because it would choke off the phony Housing Boom, ( fueled by the moronic Help to Buy Scheme, ) which is being relied upon my the Conservatives, to help get then elected in 2015. Also my reading of the Bond Markets is that they are anticipating a rise in 2015. It would not surprise me if there is further quantitative easing, in 2015, to stave off a interest rate hike before the next election. Just my reading of it. I could be wrong.