Sterling gains on Bank of England governor’s remarks

Story link: Sterling gains on Bank of England governor’s remarks

Sterling was stronger on Tuesday after the governor of the Bank of England said that inflation remains a risk to the UK economy and that interest rates will need to be raised again unless growth in earnings and credit subsides and constraints to capacity are overcome. His comments had more sway with investors than did the news that annual consumer price inflation was down to 2.5 percent in May, from 2.8 percent in April. Analysts expect that the new data will not change the Monetary Policy Committee’s mind that more rate hikes are necessary.

By midday trade in New York, sterling had added 0.2 percent to ¥240.14 versus the yen while it had gained 0.3 percent on the US dollar to $1.9740 and was up 0.5 percent to £0.6750 in relation to the euro.

The US dollar was stronger versus the euro but held steady against the yen, helped by bond yields that were higher on the session. The greenback was at ¥121.70 versus the yen, while it gained 0.2 percent to $1.3325 against the euro.

The New Zealand dollar didn’t move much versus either the US dollar or the yen after its huge decline on Monday, when the Reserve Bank of New Zealand sold off currency in order to slow its rapid appreciation in value. The kiwi traded at ¥91.45 versus the yen and at $0.7515 against the greenback.

The Swedish krona declined on new data which showed that consumer price inflation was lower in May, bringing expectations that interest rates there will remain steady when the nation’s central bank meets next week. The krona dropped 0.6 percent in relation to the euro, to SKr9.4030, while it fell 0.9 percent to SKR7.0590 against the US dollar.