In the United Kingdom and elsewhere in Europe, talk of inflation and potential interest rate hikes were inescapable. The pound delivered a solid performance over the week, bettered only by the NZ dollar and the Norwegian krone. Sterling was sustained mainly by the idea that the Bank of England will take interest rates higher before the end of the year. It strengthened by an average of 0.4%, having led the major currency field over the weekend. Reuters did try to pour some cold water on the higher rates story when it published the result of a survey of economists. The consensus among them was that the first BoE rate hike would not come until early next year. Investors paid little attention.
With the Chancellor’s Budget tomorrow, and the Bank of England’s meeting right around the corner, many investors are preparing themselves for a bumpy few weeks.
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