Economy

Sterling touches 14-month high

Sterling touches 14-month high”

Britain's pound hit a 14-month high against the dollar on Friday and was heading for its best week in more than eight years on a trade-weighted basis, as traders stacked up bets on a near-term interest rate rise from the Bank of England.

Last week's big hint from the bank's rate-setting panel that it could raise its main interest rate from the current record low of 0.25 percent as soon as November gave the pound a big lift.

However the Australian Dollar did briefly manage to register some gains overnight on Wednesday as the Australian Bureau of Statistics (ABS) reported a sharp rise in the number of Australian's entering work last month.

In a speech on Friday, Mr Vlieghe said: "Until recently, I thought the appropriate response of monetary policy was to be patient, given modest growth and subdued underlying inflationary pressure".

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.

Mr Vlieghe, who was the first Bank member to vote for a rate cut after the Brexit vote, said there was now growing evidence the United Kingdom economy was picking up.

While the ONS revealed that unemployment fell from 4.4% to 4.3% in July, the accompanying average earnings reported showed that wage growth remained flat at 2.1%, disappointing traders who had expected it to rise to 2.3% and prompting concerns about the growing gap between wages and inflation.

In the European trading, the pound rose to a 1-year high of 1.3077 against the Swiss franc and almost a 1-month high of 0.8774, from early lows of 1.2869 and 0.8907, respectively. U.K stocks, however, will once again be blunted by the strength of the pound, which has risen around 3% against the greenback amid increasing signals of an imminent rate hike from the Bank of England.

"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".



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