The pound rose for a seventh day versus the dollar, set for its longest winning streak since April 2015, after Bank of England Governor Mark Carney said Wednesday that the Monetary Policy Committee may need to raise interest rates despite a weakening economy.
Sterling erased its post-election losses and rose against most of its 16 major peers Thursday after Carney appeared to rein back on some of his rhetoric from last week when he suggested that he was firmly placed among the other doves on the MPC. It extended gains past $1.30 as chief economist Andy Haldane told the BBC that the BOE needs to look seriously at raising rates. The U.K. currency could move up toward $1.35, according to Lee Hardman, a foreign-exchange strategist at MUFG in London.
“The more hawkish commentary is something that is offering more support for the pound in the near term,” MUFG’s Hardman said. “The Bank of England is probably closer to raising rates than many people had anticipated.”
Investors will also be looking at a Parliament vote on Prime Minister Theresa May’s legislative program due London afternoon time.
“Should Prime Minister Theresa May fail to obtain an implicit vote of confidence, then we would expect the British pound to react badly across the board as political uncertainty would escalate,” strategists at UniCredit SpA, including Vasileios Gkionakis, said in a note to clients. The analysts believe “the market may be jumping the gun in the case of the Bank of England” as investors seemed to ignore that any rate increase is conditional on the trade-off between lower activity and higher inflation continuing to lessen.
GBP/USD rises 0.4% to 1.2980 after touching 1.3007, the highest level since May 25; offers are placed at 1.2995-1.30, according to a trader who asked not to be named because the person isn’t authorized to speak publicly
First resistance comes at the May 25 high of 1.3015
“Sterling continues to rise against a wall of worries, yesterday helped by what many described as a radical U-turn by Governor Carney now putting his previous dovish commentary in the past tense,” strategists at Morgan Stanley write in a note to clients
Expect sterling to rise to $1.32
Carney is due to give an interview on climate change to Bloomberg Television at 11:30 a.m. London time
EUR/GBP down 0.2% to 0.8788; first technical support seen at 0.8772, Wednesday’s low
Benchmark 10-year gilts fell a third day; yield climbs 5bps to 1.20%, after reaching 1.22%, highest level since May 9