Pound Climbs On Rate Outlook
02/02/11 -- The pound has climbed to it's best levels in almost three months, and close to a one year high against the dollar this morning on renewed ideas that an interest rate hike might be on the cards by mid-2011.News out yesterday that British manufacturing grew at the fastest pace on record in January surprised the market, so too did construction data out this morning.
Meanwhile the spectre of rising inflation is still lurking in the background. BoE Deputy Mr Bean has added to arch-hawk Andrew Sentance's stance, saying that further rises in commodity prices and inflation might eventually force the MCP's hand into raising interest rates.
Meanwhile in the States the mixture of a Democrat controlled Senate and a Republican controlled House of Representatives could make a concerted effort on tackling US government debt (currently USD14 trillion and rising) rather tricky to push through.
The US looks set to hit it's statutorily imposed debt limit of USD14.3 trillion pretty soon. When it does it either needs to raise that ceiling even higher or introduce some painful spending cuts and austerity measures of its own. Cue much squabbling and back-stabbing and an ensuing period of dollar-bashing.
