The pound advanced to its strongest level since 2008 versus the dollar as the fastest manufacturing growth in seven months boosted the prospects for higher interest rates that enhance a currency’s allure.
U.K. government bonds declined as BlackRock Inc., the world’s largest money manager, said the securities were “most vulnerable to a rise in yields.” The unexpected increase in the pace of output growth shown by today’s purchasing managers’ report added to signs a strengthening economy may prompt the Bank of England to consider raising borrowing costs. While analysts predict the BOE will keep rates at 0.5 percent at a meeting next week, Governor Mark Carney has said the time to normalize them is “edging closer.”
“The latest move higher in the pound has been driven by the better-than-expected PMI,” said Manuel Oliveri, a foreign-exchange strategist at Credit Agricole SA’s corporate and investment banking unit in London. “Sterling looks to have further upside from here with more room for rising rate expectations. Improving growth conditions should be reflected in rising risks to inflation.”
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.