The Pound rallied off its lows on Wednesday after being sold off for much of the past two months. Earlier in the week we received a better than expected inflation report which showed an annualised rise to 1.3% and Bank of England Minutes Wednesday showed policy makers were concerned inflation could rise sharply and therefore traders took this as a sign to again begin speculating on an interest rate rise at the Bank of England.
The minutes showed the BOE committee voted 7/2 in favour of leaving the official cash rate at 0.5%. But the tone of the minutes changed slightly with the following statement. “Given the pace at which spare capacity appeared to have been eroded over the past year and the possibility that productivity growth would remain weak, there was a risk that any remaining slack might soon be exhausted, causing inflationary pressures to build.” Remember rising inflation means a step closer to rising interest rates.
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