LONDON - Nov 11 Reuters - Sterling rose against the euro and dollar after the Bank of England urged all Britons to get ready for earlier interest rates rises as inflation pressure mounted in Britain over the weekend in interviews.
The bank's governor, Andrew Bailey, said in an interview to the Yorkshire Post newspaper that inflation running above the BoE target of 2.0% was very concerning and it had to be managed to prevent it from becoming permanently embedded.
Bank of England policymaker Michael Saunders said investors would be right to bet on the increase of borrowing costs with consumer price inflation above 4%, the Telegraph newspaper said on Saturday.
Interest rate futures traded on CME pointed November contracts pricing in as much as a 20% probability of a rate hike next month compared to 12% last week, while December derivatives were pricing in a 45% probability of a rate increase by then.
Currently high speculation is building that the BoE will expand ahead of the Fed, ING analysts said pointing that the bank effectively warned of second round effects from strong inflation.
Sterling rose 0.2% against the dollar to $1.3645 at 0750 GMT after briefly reaching a two week high. In lower trading, it also rose 0.2% to 84.81 pence, not far from a two-month high touched in earlier morning trade.
The 2 Year gilt yield touched 0.603% shortly after the market opened, its highest since January 2020, with gains 7 basis points on the day.