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London - The pound rose against the dollar, approaching its strongest level in three weeks, as traders await further clues from Bank of England (BoE) policy makers as to the timing of their first interest-rate increase since the financial crisis.
Monetary Policy Committee member Martin Weale - who last month said rates need to rise “relatively soon” - is due to speak at the University of Groningen in the Netherlands later on Monday. His colleagues Gertjan Vlieghe and Ian McCafferty will testify to UK lawmakers on Tuesday.
While McCafferty has voted to raise borrowing costs at the past three meetings, former hedge-fund economist Vlieghe only joined the MPC last month and these will be his first public comments as a rate setter.
“It’s primarily the US dollar that’s softening up, but it’s also potentially some anticipation of today and tomorrow’s BOE speakers” that’s behind sterling’s gain, said Josh O’Byrne, a London-based currency strategist at Citigroup.
“Weale speaks today - a hawk - and McCafferty later tomorrow, also hawkish. Citi expect inflation will be higher than consensus, perhaps enough to offset any more dovish commentary from new MPC member Vlieghe.”
Sterling weakened versus all but two of its 16 major peers last week after the BOE said in the minutes of its latest policy meeting that there’s scope to keep interest rates low as slow inflation persists. The central bank has kept it official rate at 0.5% since March 2009.
The pound rose 0.2% to $1.5351 as of 11:45, after climbing Friday to $1.5383, the highest level since September 22. Sterling was little changed at 74.22 pence per euro. Britain’s currency may appreciate to $1.55 in the next month, Citigroup’s O’Byrne said.
UK government bonds climbed, with the 10-year yield dropping two basis points, or 0.02 percentage point, to 1.84%. The 2% security due in September 2025 rose 0.17 per 1 000-pound face amount, to 101.41.
