British Pound Soars After Inflation Forecast

The British Pound (GBP) rallied this morning after the Bank of England raised its medium term inflation forecast to 2%, while suggesting that the short term inflation can go as high as 5% and will probably stay above 2% for all of 2012. This new take on the near term inflation triggered a rally of the Pound against its major counterparts, as it gives investors a very solid reason to believe that the Bank of England will have to hike the interest rates by the end of this year. Previously most of the analysts believed that the BoE will leave the rates at the current record low of 0.5% and will only start rate hikes in 2012. After the report, the British currency soared against the US Dollar (USD), Euro (EUR) and the Japanese Yen (JPY) while trading strongly higher against other currencies. The GBP/USD jumped from 1.6350 all the way to 1.6516 and looks for more gains to the upside. The GBP/JPY also moved significantly higher, from 132.10 to 134, while the EUR/GBP plunged from 0.88 to 0.8690s.