Britain’s Interest Rates May Go Up, Helping Pound Gain vs. Euro

The Great Britain pound rose today against the euro as the speculation that European banks would have problems in raising funds and the forecast that Britain’s central bank would increase the interest rates spurred demand for the sterling. The currency was little changed versus the US dollar.

The Confederation of British Industry predicted in its report that the Bank of England would raise its benchmark rate by a quarter-point every three months from the second quarter of 2011 until mid-2012. By that time the rate will reach 2.75 percent. The minutes of the Bank of England’s last Monetary Policy Committee, which will be released this week, may should that not all of the policy makers supported the decision to keep the rates at the record low level of 0.5 percent.

Nevertheless, some analysts say that the interest hike is unlikely. The mortgage approvals secured on dwellings unexpectedly declined in October, signaling about the necessity of the additional stimulus.

EUR/GBP traded at 0.8460 as of 22:58 GMT after it opened at 0.8485 and reached the intraday low of 0.8445. GBP/USD traded near 1.5504 after opening at 1.5514.

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