UK interest rates expected to rise in Q2 GBP While the pound has traded stable against weaker currencies like the euro, it has continued to decline against the US dollar as we went into the weekend. This is understandable as the dollar has been phenomenally strong and more so recently due to its appeal amid the ongoing Russian invasion of Ukraine. The Bank of England (BoE) is expected to raise UK interest rates in the second quarter of 2022 as the central bank tries to stem soaring price pressures. The BoE has already lifted the Bank Rate to 0.75% from 0.1% in late 2021, and money markets are currently pricing in 125 basis points of additional rate hikes this year. The BoE recently pushed back against these market expectations, fearing that a series of hikes may stall growth in the months ahead. Economic growth is now back above pre-covid levels despite fears that the Ukraine crisis and Russian sanctions will cause further supply chain disruptions. The latest BoE monetary policy report noted that while business confidence and labour market activity have remained robust, consumer confidence has, however, fallen in response to the squeeze on real household disposable incomes. Sterling’s direction is still uncertain as the UK battles rising inflation and a cost of living crisis resulting mainly from higher energy prices and increased National Insurance contributions. Inflation is expected to hit and stay at multi-decade highs.