Sterling strikes 7-week high on Carney rule

Julian Harris
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THE POUND yesterday jumped to its highest level against the dollar since June on the back of reforms to monetary policy announced by new Bank of England boss Mark Carney.

Sterling climbed as high as $1.557 – sharply up from lows of around $1.521 in midweek – following Carney’s guidance over the necessary conditions for rates to rise, published on Wednesday.

Carney’s move was intended to reinforce the Bank’s monetary easing, yet has sent sterling up.

“A few short sterling positions were caught out. He could have been more dovish,” CMC Markets analyst Michael Hewson said last night. “He was also very careful not to talk the pound down. And of course the growth forecasts were revised up.”

The Bank now expects 1.4 per cent growth in the UK this year, improving to 2.4 per cent in 2014 – above its earlier estimate of just 1.7 per cent growth for next year.

Recent economic data has painted a bullish picture of the UK’s recovery, and yesterday the Organisation for Economic Co-operation and Development (OECD) released figures suggesting that growth is “firming”.

The OECD’s composite leading indicator for the UK – which predicts changes in growth six months ahead – edged up to a score of 100.8, ahead of most of its peers.

Meanwhile, Carney yesterday said that finance “can absolutely play a socially useful and an economically useful function” but that the focus “has to be on the real economy”.