Speculators expect hike in UK interest rates

The British pound is closing in on its 3 month low despite the fact that inflation expectations hit the highest level in 15 years. Central Bank governor, Mervyn King attributed the rise in inflation to rising commodity prices. B of E officials are keeping a close watch on the wage rate, for indications of future inflationary pressure. Speculations rise that the B of E would soon be hiking their key interest rate in order to sustain the economy from inflation, however it remain to be seen if Mervyn King would be quick to react, as the economy experiences slowing growth. Due to lack of economic data, investors look forward to next week when consumer prices and retail sales are due for release. In addition, markets will be paying a lot of attention to B of E minutes, in order to attain a clear understanding of central banks sentiment.
Right now Interbank is 1.2644 with Natwest offering 1.2060.

source: IFX