Pound sterling rose on Mark Carney’s rate hike claims

British pound

Wednesday, after Mark Carney—Bank of England’s Governor said that an interest rate hike was probably essential and that the bank would definitely debate the said topic in the coming months, the British pound swelled into a three-week high and Britain’s Financial Times Stock Exchange 100 or FTSE 100 stock index fell.

After Mark Carney’s claims, sterling rose by over a cent to $1.2971, which is considered as the currency’s strongest since the results of Britain’s parliamentary election was shown on June 9. That left it up 1.2% on the day. Against the euro, sterling rose 0.9% to 87.71 pence, this is after reaching a seven-month low against the currency.

In accordance to this, Mark Carney said in a European Central bank conference in Portugal that policy makers would need to look at the extent to which stronger business investments offset a slowdown in consumption, as well as growth in wages and labor cost. He (Carney) also said that this was not the time to increase rates. With this being said, markets immediately priced in a greater chance of an earlier than expected rise.

ING currency strategist, Viraj Patel said that their main message would not be to over-interpret the comments, and that there’s definitely a disconnect when traders and investors take a look at what is happening in the rates market and the way the foreign exchange market is moving. He also added that in the case of the United Kingdom, this withdrawal of stimulus could just be one rate hike and not the start of a full-blown hiking cycle.      


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