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Inflation Outlook Fuels Demand for British Pound

March 12, 2010 at 4:52 by Jan Baros

Great Britain poundThe British pound gained versus currencies from its main trading partners as odds that inflation will rise in the United Kingdom spurred demand for assets in the country, as it could lead to a series of interest rates by the Bank of England.

British consumers predicted an inflation rate of 2.5 percent in a year’s time as a report signaled today, and this higher than previous revised data allowed the pound to revert a losing streak versus important currencies making the sterling to benefit in forex markets, as a higher-than-excepted inflation increases possibilities for the nation’s central bank to lift economic stimulus and tighten lending conditions, including interest rate hikes, increase investment’s profitability for pound-priced assets. Today’s report was definitely a breather for the pound, who had been losing since it’s one of the least attractive currencies among the main pairs.

Today’s report allowed a corrective movement for the pound versus all of the 16 main traded currencies, but the general scenario remains unfavorable, and further drops are likely to follow, specially versus currencies tied to growth as the Canadian dollar and its counter parts in the South Pacific region.

GBP/USD climbed to 1.5047 as of 02:47 GMT from an intraday rate of 1.4977.

If you have any questions, comments, or opinions regarding the Great Britain Pound, feel free to post them using the commentary form below.

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