Pound at 16-month high before inflation report

Sterling was trading at a 16-month high against the euro on
Wednesday (May 14th) before a key Bank of England report likely to
indicate when interest rates could rise.

BoE governor Mark Carney (pictured) will speak after the
inflation report is released, with investors watching closely for
clues as to when the bank will hike its benchmark lending rate. UK
unemployment data is also due out today.

EUR/GBP fell to 0.8134, the lowest for the
exchange rate since the end of 2012, as sterling demand was
supported by the divergence in central bank outlook.

The pound was also up against the dollar, with GBP/USD rising
0.25 per cent to 1.6888, around a cent off a recent five-year
peak.

Further pressure on the euro came as it emerged the German
Bundesbank was reportedly ready to back fresh stimulus by the European
Central Bank, whose president, Mario Draghi, last week hinted
at firmer policy action to tackle deflation in June.

That saw EUR/USD plummet to a six-week low of 1.3688 on Tuesday
before capping losses to settle around 1.3722.

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