The Bank of England is expected to leave interest rates on hold tomorrow, but the rally in the British pound over the past few days suggests that some traders may be holding out for a surprise move. Compared to the rest of the world, the UK economy is certainly standing on stronger footing.
Today, manufacturing PMI surged to a 3 year high, which comes in sharp contrast to the deterioration in the US ISM index. Output prices hit the highest level in 15 years, indicating that inflation is still a big concern while employment rose to a 3 year high. Even if they do not raise rates, this suggests that Bank of England Governor King will continue to hold onto his hawkish bias when he delivers their Quarterly Inflation report next week.