In contrast to the US dollar, traders were committed to buying the British pound today and nothing could stand in their way. Despite news that a burning car hit an airport terminal in Glasgow London this weekend and manufacturing conditions deteriorated in the UK, the British pound hit a 26 year high today.
Part of that strength is certainly a result of dollar weakness since the British pound is down against the Swiss franc, Japanese Yen and Euro, but the pound would not be able to hit the highs that it did today without some optimism about the future outlook for the British pound. Of all of the central banks meeting this week, the Bank of England is the only one that is expected to raise interest rates. With oil hovering near $70 a barrel, the world?s concern for inflationary pressures will not be going away anytime soon. The interest rate curve is already pricing in 6 percent interest rates by the end of the year. For more on the outlook for the British pound, see our Special Report British Pound Hits 26 Year High: How Much Further Can it Rise?