Hawkish BoE Minutes Spur Rate Hike Bets
Sterling surged higher across the board yesterday following a hawkish statement from the Bank of England (BoE).
The UK central bank left interest rates on hold at the record-low 0.25%, with policymakers voting 7-2 against raising borrowing costs at this juncture. However, traders piled into Sterling following the bank’s minutes report, which appeared to hint at a rate rise in November.
Policymakers said that if the British economy maintained its current growth then ‘monetary policy could need to be tightened by a somewhat greater extent… than current market expectations’.
It was also noted that a majority of bank officials believe ‘some withdrawal of monetary stimulus was likely to be appropriate over the coming months’.
The Pound soared across the board following the minutes as markets priced in a higher probability of a November rate hike.
Pound to Euro Exchange Rate Jumps 175 Pips on Hawkish BoE Bets
The Pound to Euro exchange rate rallied by around 175 pips to strike its highest level in almost two months yesterday, driven by bets that the Bank of England may be on the verge of raising interest rates for the first time in a decade.
After releasing minutes from the latest meeting, in which the BoE appeared to pave the way for a near-term tightening of monetary policy, Governor Mark Carney told reporters that the possibility of a rate hike has definitely increased and rates may need to rise in the coming months.
Carney went on to add that the Pound’s recent depreciation was making UK prices higher and stated that there had been a ‘shift’ in the bank’s balancing act.
The hawkish comments appeared to support the market interpretation that a November rate rise is on the cards.
Pound to US Dollar Exchange Rate Strikes 1-Year High Following 200-Pip Daily Gain
Sterling appreciated by around 200 pips versus the US Dollar yesterday, registering its best exchange rate for over a year.
‘Cable’ smashed through technical resistance following the hawkish BoE communiqué as investors rushed to purchase the Pound ahead of a potential rate hike in November.
US data showed that consumer prices accelerated from 1.7% to 1.9% in August, beating forecasts of 1.8%. The upbeat reading gave the ‘Greenback’ a mild boost immediately following its release, however, GBP/USD resumed a steep upward path fairly swiftly, ultimately erasing any positive impact from the US CPI print.
Later today US retail sales are expected to come in at 0.1%, but the score is likely to be overlooked by traders due to yesterday’s shift in BoE expectations.
Pound to Canadian Dollar Exchange Rate Leaps 250 Pips
The Pound to Canadian Dollar exchange rate strengthened by around 250 pips yesterday to hit a one-month high as markets reacted to hawkish sentiments from the Bank of England. Rising oil prices failed to lift the commodity-correlated ‘Loonie’ versus the Pound.
Pound to Australian Dollar Exchange Rate Strikes 2-Month High Despite Sturdy Australian Jobs Report
The Pound to Australian Dollar exchange rate rose by over 200 pips yesterday as traders turned bullish on Sterling.
The ‘Aussie’ had initially gained ground on a robust Australian employment report, which showed that 54,200 jobs were created in August. However, the upbeat jobs numbers were overshadowed by BoE rate bets later on in the day, allowing GBP/AUD to strike its highest level in over two months.
Pound to New Zealand Dollar Exchange Rate Soars 350 Pips to 4-Month High
Sterling rocketed higher by around 350 pips versus the New Zealand Dollar yesterday to hit a new four-month high. The Pound registered robust daily gains against all of its most-traded currency peers, as traders digested hawkish BoE rate hike rhetoric, but the UK currency’s gains were most pronounced against the volatile ‘Kiwi’ Dollar.
Data Released Today
13:30 USD Advance Retail Sales (AUG)
14:15 USD Industrial Production (AUG)
15:00 USD U. of Michigan Confidence (SEP P)