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Published On: Mon, Aug 18th, 2014

The British pound ticks up on renewed speculations on a rate hike

Bank of England’s Governor, Mark Carney, fueled bets on GBP strength by stating that the British economy is “much more than halfway” to full recovery.

Bank of England’s Governor, Mark Carney, fueled bets on GBP strength by stating that the British economy is “much more than halfway” to full recovery.

The pound commenced this week with a slight bounce against the US dollar, after having dipped to as low as 1.6656 on 14 August. At 11:45 am GMT it is trading at 1.6728, a 0.20 percent gain for the day. The EUR/GBP is currently quoted at 0.8004, a 0.25 percent loss for the common currency against the cable.

The sterling strength is a result of the comments of BoE’s Governor, Mark Carney, who said in a Sunday Times interview that the economy is closer to full economic recovery than many might expect. He continued by arguing that the situation might warrant interest rates to be increased before wages rise.

Carney’s interview caught many by surprise in that it appeared contradictory to the statement in last week’s Inflation Report. This in turn increased the GBP demand as some investors gave a second thought to the assessment that BoE’s interest rate hike is not coming earlier than the beginning of next year.

Provided the recent dollar strength and the yet unclear outlook on a rate hike in the UK, the GBP/USD is not seen bouncing much from here. The major 1.6755 resistance would probably cap the upside and resume the slide to 1.6550. In the unlikely scenario of a break through 1.6755, the pair would head to the next resistance located at 1.6842.

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