Sterling managed to stage a mini revival today after the Bank of England meeting minutes surprised us all. For the first time in three years we witnessed a split decision from the MPC with two of its nine members voting in favour of a rate hike.
How did this impact GBP/USD?
After a dismal run which has seen the pound lose around 3.5% against the dollar in the last five weeks, GBP/USD gained around 0.4% today, rising from $1.6606 to a high of $1.6664 to move us away for the four month low I mentioned in yesterdays post.
Does todays news mean we will see interest rates rise?
Not straight away, with UK inflation sitting at 1.6% we are still some way of the central banks 2% target and with wage growth also slowing there is still spare capacity in the economy which the BoE will look at before raising the base rate.
What today has shown is that there has finally been a change in mentality in the ranks of the MPC after months of will they won't they. The minutes showed that even though wage growth had slowed Mr McCafferty and Mr Weale felt that the UK's falling unemployment rate made in more likely salaries would start to improve in the near future.
If that is the case and a couple of the other MPC members join the bandwagon the talk of an interest rate rise before the end of the year could resurface despite Mr Carneys recent comments.
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