Sterling Reaches new Highs in Light Trade
The British pound soared to fresh highs in a day of light trade, amid comments from Bank of England Governor Mark Carney that Britain’s economy is building self-sustaining momentum.
In a speech to the Economic Club of New York, Carney said he was confident monetary policy was having the desired results, but acknowledged the BOE is unlikely to raise interest rates to control economic recovery. Central banks in advanced industrial economies will need to implement accommodative policies for the foreseeable future in order to curb potential downside risks, such as slower economic growth.
“A recovery may be gaining pace but our economies are a long way from normal,” said Carney. “Leverage is still high and weak demand for advanced economy exports could persist for some time.”
The British pound gained 80 pips to 1.6428 US, extending its month-long bullish streak. The pace of UK recovery has taken the world by surprise. Stronger than forecasted growth in manufacturing, construction and housing has sped up the nation’s recovery, forcing the BOE to revise its guidance on unemployment.
In August, the BOE pledged it would not consider raising interest rates until unemployment reached 7 percent. The central bank has revised its expectations about when that might occur several times. UK unemployment fell to 7.6 percent in the three months to September, the lowest since 2009.
The trend index is slightly bullish on GBPUSD after the pair broke the technical resistance at 1.6419. The next resistance is located at 1.6460.
Elsewhere in Europe, the common currency declined 26 pips to 0.8363 GBP, after investor confidence in the euro area fell off a two-and-a-half year high. The European Central Bank will publish its monthly report later in the week, which provides insights about the prevailing trends in the regional economy.
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