Pound Rallies Against US Dollar on Hawkish BoE Rate Hold

The British pound today rallied to new highs against the US dollar after the Bank of England held interest rates at the same level. The pound’s rally was largely influenced by the hawkish stance taken by the BoE as it stated that interest rates should rise at a faster rate this year than was previously expected.

The GBP/USD currency pair gained over 200 pips to rally from a low of 1.3848 to a high of 1.4067, crossing the crucial 1.40 psychological barrier.

The pound rallied higher after the BoE’s Monetary Policy Committee unanimously voted to maintain its bank rate at 0.50%. The MPC also maintained the bank’s asset purchase facility at £435 billion, which was in line with market consensus. The BoE Governor Mark Carney‘s hawkish comments at a press conference on the bank’s latest inflation report contributed significantly to the pair’s rally. Mark Carney stated that he expects interest rates to rise much faster and earlier than was anticipated in the November report. He also said that higher growth in various sectors of the economy would trigger higher inflation.

The release of positive US initial jobless claims data by the Department of Labor in the early American session had minimal impact on the currency pair. The bullish sentiment around the pound continued to lead the cable higher.

The currency pair’s future performance is likely to be affected by tomorrow’s UK macro releases covering manufacturing, construction, industrial production and the UK trade balance.

The GBP/USD currency pair was trading at 1.4021 as at 15:20 GMT having rallied from a daily low of 1.3848. The GBP/JPY currency pair was trading at 153.56 having risen from a low of 151.40.

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