14th July 2015
The pound jumped by more than 1% against the dollar and the euro, following comments by the Bank of England governor Mark Carney suggesting an interest rise could come sooner than anticipated.
Speaking to Parliament’s Treasury Committee, Carney said: “The point at which interest rates may begin to rise is moving closer.
“Once rates begin to adjust, we expect for those adjustments to be at a gradual pace and to a limited extent.”
Andy Scott, associate director at foreign currency specialists, HiFX, says: “Sterling jumped by more than one per cent against both the dollar and the euro on Tuesday, following comments by Bank of England Governor Mark Carney who indicated rate hikes may be closer than the market is currently expecting. His comments were clearly unexpected and caught the market off-guard with GBP/USD and GBP/EUR hitting their highs for the day at 1.5600 and 1.4130 respectively.
“One has to question how seriously we should take these comments when you consider he made similar ones last year, only to contradict himself within a number of weeks; especially when inflation is zero against a target of two percent. Perhaps the recent jump in average earnings and expectations of the impact of higher household spending is what’s prompted him just to remind consumers that near zero interest rates aren’t here to stay forever. Next week’s minutes will reveal whether any members are voting for a hike as yet, and what the general consensus among all nine MPC members is. One or more votes in favour of raising rates will likely drive sterling higher towards 1.60 against the dollar, and towards its recent multi-year high above 1.43 against the euro. ”