Pound Advances against the Euro for the Fourth Week on Interest Rate Bets

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Pound Advances against the Euro for the Fourth Week on Interest Rate BetsThe sterling extended its gains versus the euro for the fourth week after a surge in Britain’s retail sales spurred bets that the Bank of England may hike interest rates sooner than expected on the back of a strengthening economy.

The pound rose 0.5 percent this week to close at 81.02 pence per euro in London. The session saw it rise to 80.82 pence, its highest level since December 2012. The UK currency rose 0.1 percent to trade at $1.6820.

The sterling rose after minutes of BoE’s May meeting showed that the central bank intends to maintain its record low interest rates. The pound has gained by more than 1.1 percent against most major counterparts in the past year as investors shifted focus to when the central bank may hike interest rates, rather than when it will boost stimulus.

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“I think the pound is going to get a lot higher against the euro,” Eimear Daly, a London-based head of market analysis at Monex Europe Ltd told Bloomberg. “If you look at the data, people are starting to price in rate hikes. The Bank of England even admitted there may be a more balanced view, which really signals rate hikes are coming.”

The Office for National Statistics reported on Wednesday that Britain’s retail sales, including fuel, rose 1.3 percent in April from March’s 0.5 percent growth. This beat the analysts’ forecasts of a gain of 0.4 percent.

The yield of the 10-year gilt rallied 0.07 percentage point, or seven basis points, to 2.64 percent this week, the most since the week ending March 21. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com