At some point in the not-too-distant future, the Bank of England will bring to a close its programme of interest rates increases. At that time, the financial market will need to decide on the underlying strength of the economy, and whether that is sufficient to allow it to support the currency.

There is a growing concern that there are very few reasons to buy sterling outside the continued tightening of monetary policy. When that crutch is withdrawn, the pound could see a significant tumble.

Although the Federal Reserve is also possibly close to ending its own tightening, the ECB is still considered to have at least one hundred points of rate increases still up its sleeve, and this could see the pound test at least the 1.10 level versus the single currency.

In financial market terms, it has been a considerable time since the pound has found itself stripped of any support outside the basic economic fundamentals.

The Central bank has not exactly covered itself with glory over the past fifteen months or so as it has continued to perform a series of dovish hikes, where the Governor’s press conference following the announcement of yet another rate rise has had an almost apologetic air.

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