The pound rose to its highest level in seven weeks versus the dollar as both euro area and U.S. policy makers hinted at further rise in interest rates. However, the Federal Reserve refused to give a timetable for hiking the interest rates.
The sterling jumped 0.3 percent to trade at $1.5498 as of 3:45 p.m. in London and earlier hit $1.5539, the strongest level since Jan. 2. The pound advanced 0.1 percent to steady at 73.30 pence per euro and hit 73.14 pence, its highest level since January 2008.
The Bank of England’s policy maker Martin Weale announced on Tuesday that interest rates may rise sooner than the markets forecast.
“BOE policy makers’ comments still leave us comfortable that sterling has a little further to appreciate, and we continue to favor euro-sterling going lower as well on a broad recovery story,” Jeremy Stretch, a London-based head of foreign-exchange strategy at Canadian Imperial Bank of Commerce, told Bloomberg News. “It’s a question of how far we can go before we start to run into a degree of political risk. That will be the caveat that precludes sterling rallying too far.”
The BOE Governor Mark Carney, in a briefing to U.K. legislators on Tuesday, restated that the decline in inflation was only temporary. Across the Atlantic in the same day, Federal Reserve Chair Janet Yellen said that a revision in the Fed’s guidance won’t cause it to set a timetable for hiking borrowing costs. Though she said that interest rates won’t be increased soon, Yellen noted to the Senate Banking Committee that the U.S. economy is robust and that wages may be picking up.
The yields of the 10-year gilts plunged seven basis points to 1.70 percent, after dropping four basis points the previous day. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
To contact the reporter of this story; Yashu Gola at firstname.lastname@example.org