Read the story here. Advertise at Before It's News here.
Profile image
By Pound Sterling Forecast (Reporter)
Contributor profile | More stories
Story Views
Last hour:
Last 24 hours:

Pound Rises on ‘Higher for Longer’ Interest Rate Expectations

% of readers think this story is Fact. Add your two cents.

Sterling stronger as UK interest rates remain high

Sterling has been higher following a dip last week. Interest Rate expectations are setting the tone for some of the positions we are seeing so far.

The Bank of England raised interest rates as expected 25 bps last week taking UK interest rates to 5.25%. We did see Sterling dropping on the news.

Cable dropped to $1.2623, its weakest level against the dollar since late June. GBPEUR fell to 1.1565, both have since recovered.

This does highlight once again how sterling has been once again weaker following an interest rate decision to hike.

Friday saw the latest US Nonfarm Payroll data, a key factor used by the Fed in determining their pace of interest rate hikes.

This showed fewer jobs being created with 187k versus 200k than forecast but represented a trend higher in the number of news jobs from June, which was 185k.

The US unemployment rate also came down to 3.5% from 3.6%, taking the pressure off the FED a little in their quest to control inflation but also avoid hurting the US economy.

This ultimately saw the US dollar slightly weaker, which has been mildly supportive for sterling lifting cable to 1.2750, with EURUSD 1.0975 and a 1.1610 reading this morning on GBPEUR.

What are the latest FX forecasts showing us?

If we look at the latest forecast data from our sources, we can see the following on GBPEUR:

    • 13 out 52 forecasters see us Above 1.1650 =
    • 39 out 52 – Below 1.1650 =

Using this data, we can see on GBPEUR we are potentially very close to the top of the ranges.

For GBPUSD, it is more mixed, based on a spot ref of circa 1.2750. It appears that the market is fairly split on the direction of GBPUSD with a move to 1.3000 or 1.2500 fairly even. But leaning slightly to the upside.

“Higher For Longer” for UK Interest Rates

When looking at the pound and UK Interest Rates, one of the key takeaways is “higher for longer”. We expect UK interest rates will be at an elevated level for a longer period of time than previously thought.

The chances of Interest Rate hikes next month are as follows, BoE 85%, FED 16% and ECB 36%

The Bank of England are still in a difficult position trying to control UK inflation which is still very high at 7.9%

It is clear we are nearing the terminal rate with now only one or two hikes left, as the Bank of England has to wait for the full effects of the previous rate hikes to be felt in the wider economy.

In fact, there are some warning signals in the economy. We are already seeing some of the potential negative effects of higher interest rates.

Taylor Wimpey, one of the UK’s largest house builders reported profits falling by a quarter. They are blaming rising interest rates and a sluggish housing sector, plus lack of demand for new housing. Taylor Wimpey expects to build 10,000 homes this year, compared to 14,000 last year.

Wilkinson, the high street retailer is to enter administration. The higher interest rates we see places increases strains on the economy and creates the conditions where we can see weaker businesses put under extra pressure. We know about the UK cost of living crisis caused by higher rates. Weaker high street retailers going out of business is a classic warning sign of potential economic problems ahead.

This really brings into importance the key release for sterling this week, GDP figures on Friday…

If you have a transaction to consider and wish to consult an FX expert regarding the latest forecast news, please get in touch.

The post Pound Rises on ‘Higher for Longer’ Interest Rate Expectations appeared first on Pound Sterling Forecast.


Before It’s News® is a community of individuals who report on what’s going on around them, from all around the world.

Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.

"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.

Please Help Support BeforeitsNews by trying our Natural Health Products below!

Order by Phone at 888-809-8385 or online at M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at M - F 9am to 5pm EST

Humic & Fulvic Trace Minerals Complex - Nature's most important supplement! Vivid Dreams again!

HNEX HydroNano EXtracellular Water - Improve immune system health and reduce inflammation.

Ultimate Clinical Potency Curcumin - Natural pain relief, reduce inflammation and so much more.

MitoCopper - Bioavailable Copper destroys pathogens and gives you more energy. (See Blood Video)

Oxy Powder - Natural Colon Cleanser!  Cleans out toxic buildup with oxygen!

Nascent Iodine - Promotes detoxification, mental focus and thyroid health.

Smart Meter Cover -  Reduces Smart Meter radiation by 96%! (See Video).

Report abuse


    Your Comments
    Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

    Load more ...




    Email this story
    Email this story

    If you really want to ban this commenter, please write down the reason:

    If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.