Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

Sterling shatters $1.70 resistance line on rate rise talk

1 Comment
Sterling shatters $1.70 resistance line on rate rise talk

The low rumble of rate talk emanating from the Bank of England (BoE) has finally pushed sterling over its long-term resistance line of $1.70, with the pound rising to $1.7007 in trading on Monday.

Having repeatedly bumped along at around $1.69, comments from former BoE deputy governor Charlie Bean saying he would welcome a rate rise powered the exchange rate to a five-year high.

Profit taking rapidly pushed the exchange rate back down to $1.6977 however. Versus the euro, sterling stood at an 18-month high of €1.255.

‘As we start a new trading week, sterling has briefly pushed the 1.70 level on cable, the currency still feeling the effects of BoE governor Carney’s speech of last week, suggesting that rates may move as early as this year,’ said Simon Smith, head of research at trading platform FxPro.

In a speech at Mansion House on Thursday, Carney said that ‘the first rise in interest rates… could happen sooner than markets currently expect’. Credit Suisse on Monday bought forward its timetable for the first increase in rates from February 2015 to November 2014.

JP Morgan Private Bank head of FX strategy Sara Yates said she believed that investors may now be over-reacting to hawkish sentiment however.

‘Carney needs to convince four other members of the Monetary Policy Committee (MPC) to affect the pace of interest rates,’ said Yates.

‘During the Inflation Report press conference we were puzzled by Carney’s comment that the report was not validating any particular rate profile, because that seems to be exactly what it did.

‘We think the contradiction may be because the Inflation Report reflects the consensus within the monetary policy committee, while in the press conference Carney is freer to express his own, more hawkish view.

‘We think Carney has a lot of work to do to convince four others on the MPC of his view point, especially as he needs to convince them about intangible measures (such as the size of the output gap).’

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Where A-rated Pattullo is finding the best bond opportunities

Where A-rated Pattullo is finding the best bond opportunities

Henderson Global Investors head of retail fixed income explains how he is managing his fund against the surprise current monetary policy divergence.

1 Comment Play Taxicab Tenner: Allianz Global Investors' AA-rated Simon Gergel

Taxicab Tenner: Allianz Global Investors' AA-rated Simon Gergel

Our much anticpated new series is here! We hand a black cab driver a tenner and grill the manager of the 125-year Merchants trust until the meter runs out.    

Play Europe bulls, a retail boost and why a little inequality can be a good thing

Europe bulls, a retail boost and why a little inequality can be a good thing

This week’s Investment Pulse looks at whether investors should be bullish on Europe, the surprise rise in UK retail sales and if a little inequality is a good thing.

Your Business: Cover Star Club

Profile: meet the duo at the heart of Hargreave Hale's succession plan

Profile: meet the duo at the heart of Hargreave Hale's succession plan

For the first time in the company's history a non-Hargreave is now at the head of the north west broker and asset manager

Wealth Manager on Twitter