Tuesday, June 17, 2014

The Sterling is on four and a half years high

The pound fell for the first time in five days against the dollar after U.K. inflation dropped to its lowest rate in 4 1/2 years in May, damping speculation the Bank of England will raise interest rates sooner than forecast. Sterling weakened against most of its 16 major peers. The yield on two-year U.K. government bonds earlier reached the highest since 2011 after policy maker David Miles hinted that minutes of its June 5 meeting will show the central bank is moving closer to raising interest rates, according to the London-based Times newspaper. Governor Mark Carney said on June 12 that borrowing costs may rise sooner than economists expect.
Sterling slid less than 0.1% to $1.6975 at after rising to $1.7011 yesterday, the highest since August 6, 2009. The pound was little changed at 79.91 pence per euro after yesterday appreciating to 79.59 pence, the strongest level since Oct. 1, 2012. The pound strengthened 8.9 percent in the past year, the best performer after the New Zealand dollar among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 1.7 percent and the dollar was little changed. Regarding the inflations measures, Consumer prices rose 1.5% in May, the least since October 2009, the Office for National Statistics said. That compared with a n forecast of 1.7%. Inflation has been at or below the central bank’s 2 percent target for six months, the longest stretch since 2009.

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