News Column

Pound Spikes After BoE's Carney Hints On Early Rate Hike

June 12, 2014



BRUSSELS (Alliance News) - The pound gained ground against its key counterparts in Asian deals on Friday after Bank of England governor Mark Carney signaled that interest rate could rise sooner than forecast, due to strong economic growth.

In a speech at the annual Mansion House in the City of London to financial and political leaders on Thursday, the governor said that interest rate "could happen sooner than markets currently expect." "There's already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced. However, the decision would be dependent on data and is not a pre-set course", he added.

There remains more spare capacity in the economy that would need to be used up first, he said.

The timing of the first rate hike is less important than subsequent pace of rate increases, Carney told, adding that "we expect that eventual increases in Bank Rate will be gradual and limited".

The pound appreciated almost 0.2% to 1.6958 against the dollar, its strongest since May 8. At Thursday's close, the pair was quoted at 1.6927. The pound is likely to find upside target around the 1.70 area.

The pound which ended yesterday's trading at 1.5202 against the Swiss franc climbed to a near 2-year high of 1.5231. The next possible upside target for the pound is seen around the 1.54 level.

The pound rose by 0.2% to a 4-day high of 172.52 against the yen from Thursday's closing quote of 172.12. If the pound extends its gain, it may find resistance at the 173.00 zone.

The pound firmed to a 1-1/2-year high of 0.7991 against the euro and held steady. Continuation of the bullish trend may lead the pound to a resistance around the 0.78 region. The euro-pound pair was valued at 0.8003 at yesterday's close.

Looking ahead, German final CPI data for May, UK construction output for April, Eurozone employment for the first quarter and trade balance for April are due in the European session.

From the US, PPI for May and Reuters/University of Michigan's preliminary consumer confidence index for June are set for release in the New York session.



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Source: Alliance News


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