Earlier this week FT Alphaville's blog mentioned that sterling has recently “tumbled to a 16-month low against the euro and a five-month trough versus the dollar”.
The weakness of sterling is nothing new. In recent months, the market has continued to reduce its expectations for the value of sterling. In the face of weak economic growth, an interest rate rise in the near future looks less and less likely.
And, what of interest rates? Will we see a rate rise tomorrow? The market says no:
Figure 1: Market expectations of a rate rise have moved
Expectations for base rate