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Pound Gains Against Euro & Dollar

The British pound steadied around $1.25 this morning after a series of swings a day earlier driven by competing signals on the outlook for growth, interest rates and Britain’s withdrawal from the European Union.

Kristin Forbes, an external member of the BoE’s Monetary Policy Committee, said in remarks published on Tuesday that the Bank should raise interest rates soon if British economic growth remains solid and inflation continues to accelerate.

The BoE’s regional agents report due today may give some further insight into Forbes’ thinking.

At its meeting, last week, the BoE voted unanimously 9-0 to keep rates on hold at a record low of 0.25 percent but raised its 2017 growth forecasts further while declining to do the same with its inflation outlook.

Strategists have warned that the pound “will need to be careful not to get too far ahead of itself” with investors waiting for the outcome of the final vote in parliament on Article 50 later on today.

In a further risk for the currency, which some banks including Goldman Sachs have said could fall another 10 percent this year, analysts pointed to polls showing Brexit had boosted support for Scottish independence.

A majority of Scots backed staying in the EU, and the Scottish National Party (SNP), the biggest party in Scotland’s parliament, has said there should be another independence vote if its views on Brexit are rejected.

Scotland’s devolved parliament rejected May’s plans for how to exit the EU in a symbolic, non-binding vote on Tuesday, a demonstration of the divisions between London and Scotland when it comes to Brexit.

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