The pound strengthened for the first time in four days against the dollar as Bank of England policy maker Kristin Forbes said an improving global economy may trigger interest-rate increases sooner than investors expect.
Sterling touched its highest in almost seven years against the euro before retreating, amid speculation the anti-austerity Syriza party won’t push Greece out of the currency bloc having won that nation’s elections on Sunday. U.K. government bonds declined. Investors have pushed back bets on when the BOE will raise borrowing costs to beyond the end of 2015 on speculation slowing inflation will delay central-bank action.
“We should see some stabilization and perhaps some scope for sterling to move higher in the near term,” said Kamal Sharma, senior Group-of-10 currency strategist at Bank of America Merrill Lynch in London. “The BOE has expressed some concern in the past about the extent to which U.K. rate-hike expectations have been pushed back into 2016. That’s fairly consistent with the Forbes comments that the market may be overly complacent on the timing of the first U.K. rate hike.”