The pound strengthened against its major counterparts in the New York session on Wednesday, after the Bank of England Governor Mark Carney suggested that the bank could tighten monetary policy soon as spare capacity erodes, and to contain inflationary pressures.
“Some removal of monetary stimulus is likely to become necessary if the trade-off facing the MPC continues to lessen and the policy decision accordingly becomes more conventional,” Carney at the European Central Bank Forum in Sintra, Portugal.
“The extent to which the trade-off moves in that direction will depend on the extent to which weaker consumption growth is offset by other components of demand including business investment, whether wages and unit labour costs begin to firm, and more generally, how the economy reacts to both tighter financial conditions and the reality of Brexit negotiations,” he told.
The remarks by Carney marks a significant shift from previous stance, when he sought more time to hike rates amid mixed signals on economic growth.
Data from the Nationwide Building Society showed that UK house prices increased in June after declining for three straight months.
House prices advanced 1.1 percent month-on-month, reversing a 0.2 percent fall in May. Economists had forecast a marginal 0.1 percent rise.
The currency has been trading in a positive territory in the European session.
The pound climbed to near a 3-week high of 1.2964 the greenback and near a 5-week high of 145.39 against the yen, from its early lows of 1.2794 and 143.27, respectively. The pound is likely to find resistance around 1.32 against the greenback and 148.5 against the yen.
The pound hit an 8-day high of 1.2428 against the Swiss franc, after having fallen to a weekly low of 1.2279 at 3:00 am ET. The next possible resistance for the pound-franc pair is seen around the 1.26 region.
Reversing from an early near 8-month high of 0.8880 against the euro, the pound advanced to a 5-day high of 0.8772. On the upside, 0.86 is likely seen as the next resistance level for the pound.
Data from the European Central Bank showed that Eurozone monetary aggregate expanded in May and credit to the private sector increased at a slightly faster pace.
The broad monetary aggregate M3 climbed 5 percent year-on-year in May, following a 4.9 percent rise in April. M3 growth matched economists’ expectations. The annual growth averaged 5.1 percent in three months to May.
The material has been provided by InstaForex Company – www.instaforex.com