Trade-weighted sterling since Brexit Vote http: TMSNRT.rs 2 HWV 9 Hv Updates rates, headline; adds quote and chart Oct 18 Reuters - Sterling steadied near 20 month high against the Euro on Monday after Bank of England Governor Andrew Bailey sent a fresh signal that the central bank is gearing up to raise interest rates as inflation risks mount.
Sterling has gained 5.5% against the euro this year, with analysts pointing to expectation that the BoE will raise rates as a major factor supporting the pound, while the British economy has struggled with a shortage of labour, an energy crisis and rising COVID - 19 cases.
During an online panel discussion on Sunday organised by the Group of 30 consultative group, Bailey said that the BoE will have to act on the risk of medium-term inflation in its monetary policy meetings.
On the expectation of rate hikes, 2 year - currency bond yields rose by 16 basis points to their highest level of 0.751% since May 2019.
Overnight, sterling surged to its highest level of 84.25 pence against the Euro since February 2020. By 1450 GMT it lost some steam, trading 0.1% lower at 84.54 pence.
Versus a strengthening dollar, it edged 0.1% lower at $1.3726, but not far from a one month high touched on Friday.
The bank of England seems to be use the weekends to prime the markets for imminent rate hikes Deutsche Bank investment strategist Jim Reid told clients. Sterling has seen little change as markets were already pricing in a rate action.
Last weekend, Bailey stressed the need to limit inflation from becoming permanently embedded and fellow policymaker Michael Saunders said households must brace for significantly earlier interest rate rises.
The BoE looks set to become the first major central bank to raise interest rates since the beginning of the pandemic early last year. Investors were betting on a rise in the interest rate in November to 0.35%.
This week traders were also awaiting CPI September inflation data for Britain due on Wednesday.