The British pound rallied against both the US dollar and Euro thanks to the strong demand for high yielding currencies and hawkish comments from Bank of England policymaker Sentence.
Although many people believe that a rate cut by the BoE is a done deal, Sentance’s comment that setting monetary policy in the months ahead will be a particularly challenging task suggests that the central bank has not made up its mind. Like his other counterparts, he was worried about the upside risk to inflation and the downside risk to growth. Unfortunately tomorrow’s data will not give traders any new information on where the greater pressure lies since the market has already discounted a further deterioration in the housing market and Nationwide house prices and mortgage approvals are expected to confirm that.