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Home » News » Currencies » Sterling rises as inflation increase points to potential BoE rate hike

Sterling rises as inflation increase points to potential BoE rate hike


Clothing drove much of that rise, with prices in the sector increasing at their fastest pace for 6 years, while higher petrol costs also played their part. The FTSE and pound both reacted pretty well to the news. The former jumped 0.7%, though it was also helped by its banking stocks, while the latter crept towards 1.27 against the dollar and took another 0.3% off the euro. Sterling’s reaction likely stems from the fact that, if inflation keeps rising as expected, the Bank of England may well be forced to raise rates at some point in 2017.

Over in the Eurozone the indices had their own data to process; while the German ZEW economic sentiment figure remained unchanged at 13.8, the region-wide reading surged to its best level in 6 months. This, alongside the sector-lifting positive reaction to the restructuring plan Unicredit revealed this morning – with Italian’s largest bank jumping nearly 8.5% in the aftermath of the announcement – helped the DAX and CAC rise 0.9% and 0.7% respectively.

Looking ahead to the US open and after struggling for momentum last night the Dow Jones appears ready to hit some more highs, with the futures promising a 50 point increase when the bell rings on Wall Street. That would leave the Dow at 19850, a level made all the more astonishing given that a Federal Reserve rate hike is a near-certainty tomorrow evening.

Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

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