BoE Official Boosts Sterling with Talk of Rate Hikes
The Pound registered gains across the board on Friday as rising rate hike bets increased demand for the UK currency.
Sterling rallied strongly on Thursday when the Bank of England’s (BoE) minutes report suggested that policymakers were prepared to start tightening policy in the near future and demand for the Pound accelerated again on Friday following hawkish comments from a BoE official.
Gertjan Vlieghe, who is generally considered one of the most dovish members of the bank’s nine-person Monetary Policy Committee (MPC), said that ‘we are approaching the moment when the bank rate may need to rise’, before going on to declare that rates would need to rise more than once if the domestic economy develops as expected.
Pound to Euro Exchange Rate Hits 2-Month High as Traders Eye BoE Tightening
The Pound to Euro exchange rate strengthened by around 150 pips on Friday to strike a new two-month low as Vlieghe’s hawkish comments propelled Sterling higher across the board.
The recent shift in bank rhetoric led traders to readjust their rate hike bets, leaving the Sterling overnight index average, which reflects market rate expectations, at its highest level since the Brexit vote.
Further gains can be expected for GBP/EUR in the coming days if BoE bets continue to swell. Indeed, Governor Mark Carney is due to speak later this afternoon and could spark another Sterling rally if he discusses the potential for near-term rate rises.
Pound to US Dollar Exchange Rate Hits Highest Level Since Brexit Vote
‘Cable’ appreciated by around 200 pips on Friday, with Sterling striking its highest level against the US Dollar since the Brexit vote.
Demand for GBP/USD soared when one of the BoE’s most cautious policymakers suggested that multiple rate rises could be on the cards over the next few months. Data in the US also helped stoke the rally as disappointing numbers weighed on the US Dollar.
US retail sales came in at -0.2%, undershooting expectations of +0.1%, while industrial production shrank -0.9%, missing forecasts of +0.1%. Both figures appeared to have been impacted by Hurricane Harvey.
Pound to Canadian Dollar Exchange Rate Leaps 250 Pips
The Pound to Canadian Dollar exchange rate surged 250 pips on Friday to strike a six-week high. Increased expectations for monetary tightening in the UK boosted Sterling’s appeal, while rising oil prices failed to impact GBP/CAD.
Crude registered its third consecutive weekly increase on Friday, however, this was not deemed significant enough to bump the commodity-correlated ‘Loonie’ higher.
Pound to Australian Dollar Exchange Rate Strikes 2-Month High After Rallying 250 Pips
Sterling strengthened by around 250 pips against the Australian Dollar on Friday, hitting a fresh two-month high as rising UK rate hike bets bolstered the appeal of the Pound. GBP/AUD has now entered a bullish trading formation, suggesting that there could be further gains in store for the British currency.
Pound to New Zealand Dollar Exchange Rate Hits New 4-Month High
The Pound to New Zealand Dollar exchange rate increased in value by just over a cent on Friday to strike a fresh four-month high. Political uncertainty surrounding elections in New Zealand could dampen demand for the ‘Kiwi’ in the short-term, while hawkish BoE bets could easily drive GBP/NZD higher during this week’s session.
Data Released Today
10:00 EUR Euro-Zone Consumer Price Index (YoY) (AUG F)
16:00 GBP BOE Governor Carney Speaks at IMF in Washington, DC