POUND LIVE: Pound hits 5-week high as Mark Carney suggests interest rate rise
THE pound has hit its highest levels since the election, after Bank of England Governor Mark Carney suggested that interest rates could soon start to rise.
Mark Carney hinted that interest rates could soon rise
Sterling hit 1.3 against the US dollar, levels not seen in around five weeks, and held on to gains against the euro at 1.136.
Britain's currency was given a rocket-boost after the Bank of England chief appeared to hint that interest rates could soon start to rise.
With the cost of living already well above the Bank's target of two per cent, Mr Carney said tolerance from policymakers for higher inflation is set to start disappearing.
Markets took the comments as a sign that interest rates may soon move to 0.5 per cent from 0.25 per cent, as higher rates helps ease inflation.
Mr Carney's were a turnaround after he last week said now is not the time to raise rates amid Brexit and the outcome of the election.
The pound continued to climb against the dollar on Thursday
The pound held on to yesterday's gains against the euro
Connor Campbell, financial analyst at Spreadex.com, said: "Though the Bank of England chief was careful to qualify his suggestion that ‘some removal of monetary stimulus is likely to become necessary’ with a long list of things that need to improve, or in the case of Brexit, become clearer, investors have taken his comments as another sign that the central bank may be moving towards a rate hike, however slowly.
"This meant that the rapid rise seen by cable on Wednesday has been complimented by another 0.4 per cent jump, taking the pound to a five week peak just shy of $1.30."
It comes after three members of the Bank's Monetary Policy Committee (MPC) called for rates to rise in June.
Mark Carney warns time is not right for interest rate rise
Another member, chief economist Andy Haldane, said he may start to vote for a rise in the second half of the year.
The Bank's next rate-setting meeting will take place in August, and markets are set to scrutinise all comments made by members of the MPC in the lead-up.
Higher interest rates tend to strengthen a currency, while lower rates and money-printing weaken it.
More to follow...