Stirling has soared to a 26-year-high against the dollar. That is partly because UK interest rates are expected to go up this week, but traders said it was also a factor of the dollar’s weakness as the Fed is likely to keep rates in the US unchanged this year 5.25% and may even cut them.
From this time a year ago, the value of the pound is up 11% against the dollar – from $1.85 to a fraction under $2.02. The Bank of England’s Monetary Policy Committee is due to meet on Thursday, with most economists predicting a 0.25% rise in the cost of borrowing in the UK to 5.75%.
However some analysts think they may leave it another month because of the current terror alerts as well as the fact that Britain has a new Prime Minister and UK consumer confidence is flagging. The pound is not the only currency that is strong against the dollar. The euro is near an all-time high against the US currency, though the European Central Bank is expected to leave rates unchanged this week.