Yesterday saw Bank of England Governor Mark Carney present new quarterly forecasts and a revision to the bank’s forward-guidance policy. Not surprisingly, instead of lowering the unemployment threshold which is expected to reach the “magical” 7% threshold during the spring, Carney has decided to replace it with a range of economic indicators. Carney also commented on how he expects interest rates to remain at 0.5% for the foreseeable future whilst the economic recovery takes shape.
And yet this morning we have heard an interview by the Bank of England Chief Economist Spencer Dale intimating that interest rates may start rising in the spring of 2015. There will then follow a gradual rise of the rates leading to up to 2% by the end of 2016.
There isn’t a great deal of news coming out of the UK today but we should see it consolidate the gains it has made in the last 24 hours. Now seems to be a particularly good time to buy USD with rates creeping over the 1.6600 mark at interbank levels and reached 2-week highs. More broadly speaking GBP is having its strongest period against USD since mid 2011.