by Peter Lavelle
The UK pound has hit 1.3559 versus the euro today, its highest since December 21st 2008, or more than 7 years.
Sterling has climbed, chiefly because governor of the Bank of England Mark Carney has presented an upbeat view of the UK’s economic outlook at today’s Inflation Report, even going so far as to suggest that the central bank may hike interest rates sooner than currently forecast.
Mr. Carney said today that the sharp drop in oil prices in recent weeks would significantly boost consumer spending in the UK, insofar that cheaper oil gives people more spending money. Given this, the central bank upgraded its prediction for UK economic growth in 2016 by +0.3%, to 2.9%.
Moreover, the Bank of England’s governor added that if the UK’s economy continues to recover strongly, “it would be appropriate for Bank Rate to increase more quickly than embodied in current market yields.” This raises the prospect of higher UK interest rates sooner, thereby boosting sterling.
