The Great Britain pound advanced today, rising to the highest level since October 2008 against the US dollar, bolstered by speculations that the Bank of England will raise interest rates sooner than was expected. The interest rate outlook offset the negative impact of today’s economic data on the currency.
BoE Governor Mark Carney hinted last week that monetary tightening may happen sooner that markets have been anticipating. Martin Weale, External Member of the Monetary Policy Committee, echoed such view, saying that perhaps “the first rise needs to come sooner than would otherwise be the case”. While the minutes of the latest BoE policy meeting were a bit more dovish than economists expected, they also left room for early rate hikes:
The more gradual the intended rise in Bank Rate, the earlier it might be necessary to start tightening policy.
The interest rate outlook overshadowed today’s data, which was not particularly good, allowing the sterling to rally. Retail sales were down 0.5 percent in May from April, though they rose 3.2 percent from the previous year.
GBP/USD wad up from 1.6993 to 1.7038 as of 17:35 GMT today, reaching the high of 1.7063 intraday. GBP/JPY advanced from 173.20 to 173.74. EUR/GBP ticked down from 0.7999 to 0.7988 following the rally to the high of 0.8025.
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