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| The pound is rising, as the Bank of England hints that it may hike interest rates. |
Sterling stands at the border of a new 7-year high versus the euro today, at 1.3655, just one tenth of a cent from its highest since December 21st 2007. This is chiefly because several members of the Bank of England’s Monetary Policy Committee (MPC) have hinted that UK interest rates may rise quicker than financial markets currently expect. Sterling also rose today, because UK mortgage approvals jumped for the first time since June last month, according to the British Bankers’ Association (BBA.)
Sterling is rising versus the euro today, first because the minutes of the MPC’s interest rate meeting this month showed that two members of the nine-person committee thought that the decision whether to hike UK interest rates was “finely balanced.” This indicates that the BoE is moving closer toward hiking UK interest rates, which would in turn make British investments more profitable, and so lift the pound.
Moreover, MPC member Martin Weale said in written testimony to Parliament’s Treasury Committee yesterday that it may be “appropriate to raise bank rate rather earlier than financial markets currently anticipate.” This reflects recent comments by MPC member Kristin Forbes that UK interest rate hikes may be needed “in the near future,” and so therefore adds to expectations that the Bank of England will increase borrowing costs sooner rather than later. Hence, the pound’s momentum.
Meanwhile, sterling also holds an advantage over the common currency, because UK mortgage approvals rose +36,400 last month, according to the BBA, +200 more than forecast, and the first increase since June 2013. This indicates that there’s still momentum behind the UK’s housing market, which will contribute to Britain’s economic growth.
