The British pound is weaker today, but watch out: an interest rate hike is still likely, and the pound will eventually rise, says this strategist.
The British pound has been weaker today after minutes from the Bank of England's recent meeting were released and Chancellor of the Exchequer George Osborne presented his budget. But the weakness will be temporary, says Paul Robinson, head of European FX research at Barclays Capital.
I was asking Robinson about the timing of the next interest-rate hike in Britain given the minutes released today, and he told me he still thinks a rate hike is likely in May, "as long as first quarter growth isn't very weak indeed." Inflation has been running well above the target rate for some time now, and eventually that "does raise the risk that raise rises going forward will start increasing, and then they'll have real problems." That concern will push policymakers toward a rate hike "as long as growth is remotely OK," Robinson told me.
All this should be good news for the pound, Robinson said. He expects the pound to rise against the euro - and the euro to rise against the dollar once the upcoming leaders' summit is out of the way - so that the pound will reach 1.82 against the dollar in a year.
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