Wednesday, May 7, 2014

British Pound Climbs Before BOE Decision

The pound reached the strongest level in nine weeks against the euro before the Bank of England announces its monetary policy decision tomorrow.

The U.K. currency was about 0.1 percent from the highest since August 2009 versus the dollar amid speculation an improving economy will spur the central bank to increase interest rates sooner than it currently predicts. Bank of England governor Mark Carney said last week borrowing costs may remain low due to slack in the labor market. U.K. government bonds were little changed.

The decision will be the first since the jobless rate dropped enough to void Carney’s initial commitment on borrowing costs. Even with unemployment falling, he has pushed back against expectations of an imminent rate increase, saying more spare capacity needs to be absorbed before policy makers can remove stimulus.

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