Pound hits highest since Brexit vote on rate rise speech

Pound hits highest since Brexit vote on rate rise speech”

Its tilt towards the first interest rate hike in more than a decade, and additional comments from Governor Mark Carney, saw sterling climb over 1% to hit $1.34 for the first time in over a year.

"Admittedly, the Bank of England has previously talked up the likelihood of an interest rate hike then failed to follow through, but there does seem to be a more concerted effort this time around and more unanimity within the MPC of the case for a hike". It extended those gains to $1.3450 on Friday, up half a percent on the day.

Against the euro, it gained 0.3 percent to 88.75 pence.

The pound has continued to rise on currency markets this morning and gilt yields have surged further as further hawkish commentary from the normally dovish MPC policymaker Gertjan Vlieghe built on the unexpectedly hawkish tone yesterday from the Bank of England on the potential for a possible move in interest rates.

The Bank kept rates at 0.25% this week, but hinted at a rise in the future.

This signalling has gone a long way to help underpin the pound this week, particularly if we get further hawkish rhetoric from these other central banks that suggest they may also look to tighten policy in the coming months.

Brexit headlines were also on investors' radar ahead of a speech in Florence on Friday by British Prime Minister Theresa May.

Yields on the United Kingdom government's two-year debt climbed to levels last seen before the nation voted to leave the European Union.

Brussels has said talks on Britain's future trading relationship with the European Union can only start after the other 27 European Union governments are satisfied that "sufficient progress" has been made on the terms of the departure.

However, Mr Carney said that "any prospective increases" in the Bank's benchmark interest rate would be made at "a gradual pace and to a limited extent" and would need to continue providing "substantial support to the economy".

"We're still in the middle of Brexit negotiations, we've got the Conservative party conference coming up and we're in a time of political uncertainty".

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