BOE Carney’s Comments Boost Pound

The pound rose from near a four-month low versus the dollar after Bank of England Governor Mark Carney said an expectation of a recovery in wages may prompt policy makers to increase interest rates.

Sterling strengthened for the first time in four days against the euro after Carney said in a Sunday Times interview policy makers “don’t have to wait for the fact” to increase its benchmark rate from a record-low 0.5 percent, where it has been since March 2009. Investors may gain a clearer picture from the minutes of the Monetary Policy Committee’s last meeting, due to be published on Aug. 20. U.K. government bonds fell, pushing 10-year yields up from close to a 12-month low.

“Carney’s comments that the BOE would consider raising rates before real wages are growing sustainably and that there are a wide range of views on the MPC have been interpreted less dovishly,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Recent pound weakness may prove only temporary, especially versus the euro.”

The pound gained 0.2 percent to $1.6730 at 2:06 p.m. London time after falling to $1.6658 on Aug. 14, the lowest since April 8. The U.K. currency appreciated 0.4 percent to 80 pence per euro after touching 80.36 pence on Aug. 14, the weakest level since June 12.

Carney’s focus on wages was promoted in the BOE’s quarterly Inflation Report on Aug. 13, when the central bank said annual earnings growth at the end of this year would be half what it previously predicted. Data that day showed wages fell for the first time since 2009 in the second quarter.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza