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Pound Exchange Rate Climbs Higher on BoE Hawkishness

24 February 2018 by News Desk

Sterling has been rallying higher in the market after the Bank of England (BoE) discussed the possibility of quicker interest rate rises, say exchange rate experts FC Exchange.

The pound began Friday’s European trading climbing higher against other currency majors including the euro (GBP/EUR) and Australian dollar (GBP/AUD). The GBP/EUR exchange rate has managed to attain highs of 1.1378 (around +0.52% higher) so far in Friday’s session, as hawkish remarks from the Bank of England (BoE) regarding monetary policy have bolstered sterling.

Bloomberg reports that the market-implied probability of the central bank increasing interest rates in the May monetary policy meeting has risen from 51% at the start of February to 85%.

Bank of England Chief Economist Andy Haldane helped sterling with his positive comments on wages. Wages are currently hovering 3.5% lower than the central bank had expected when it made forecasts in May 2016. This is mostly the weaker pound’s responsibility, and Haldane suggested that if the BoE waited and hiked rates slower than needed, there could be an economic crash.

Haldane said: ‘Historically the thing which has killed jobs has been central banks stepping on the brakes too late. As [once Federal Reserve Chair] Janet Yellen says, recoveries don’t die of old age, they die because central banks step on them, because they react too late. We’re absolutely clear, we don’t want to go back there again because it is bad news for jobs. That means going in this limited and gradual way to head things off in advance to prevent having to step on brakes, do a handbrake turn at a later stage.’

Additionally, central bank Chief Mark Carney stated that the central bank needed to raise rates wisely in coming years considering inflationary pressures.

Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.

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