Sterling powers to a seven-year high against the euro
The pound hit its strongest level in more than seven years against the euro, powered by prospects of a further divergence in monetary policy as the UK's economy gathers momentum.
Pound bulls - who think sterling will strengthen further - got more encouragement this week as Bank of England policy makers signalled that Britain's first interest-rate increase since the outbreak of the global financial crisis may come sooner than investors anticipate. UK government bonds were little changed. The European Central Bank, which kept its main interest rate at a record low yesterday, is implementing a plan to buy €60bn of assets a month until at least September 2016 to revive the 19-nation economy.
"It's primarily a sterling story, but obviously counting on what is going on with the euro at the same time," said Neil Mellor, a senior currency strategist at Bank of New York Mellon Corp. The BOE is "becoming more confident about raising interest rates," he said.
The pound strengthened 0.1pc to 69.90 pence per euro as of 2:53 pm London time, after touching 69.63 pence, the strongest level since November 2007. Sterling slipped 0.2pc to $1.5602, after gaining 1pc in the previous two days.
The time for the benchmark interest rate to rise from its record low is "moving closer", Carney told MPs in London on Tuesday.
Monetary Policy Committee member David Miles said in a speech in the capital on the same day that "the time to start normalisation is soon".
Investors don't see rates rising until May 2016 at the earliest, according to forward contracts based on the sterling overnight index average.