Governor Mervyn King’s insistence earlier this week that inflation remains a problem, hinting that the bank won’t be rushing to cut interest rates, has already helped to lift rate spreads in favor of the pound. Compare this with the rate hike that many still expect from the European Central Bank and "the risks, at least on the basis of interest rate differentials, would appear to be skewed firmly against sterling," Mellor said. This followed a report from the Royal Institute of Chartered Surveyors earlier in the day that the balance of surveyors reporting a rise in house prices fell to -14. This came as market sources reported distinct flows out of sterling, coinciding with the completion of The Royal Bank of Scotland consortium’s takeover of the Dutch bank, ABN-Amro. read more
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