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Forex News: Pound Climbs On BoE Vlieghe's Rate Hike Forecasts

Pound Climbs On BoE Vlieghe's Rate Hike Forecasts

05/22/2018 - 07:39:00 (RTTNews)

(RTTNews) - The pound strengthened against its major opponents in the European session on Tuesday, after the Bank of England policy maker Gertjan Vlieghe said that UK interest rates are likely to rise by 25 to 50 basis points every year over a three-year forecast period, bringing policy rate closer to neutral.

Speaking to the Treasury Committee, Vlieghe said his own prediction for growth and inflation is consistent with a gradually rising path of interest rates.

"My own central projection will require one or two quarter point rate increases per year over the three-year forecast period."

"That path would bring us closer to the neutral policy rate, which I continue to think is likely to be well below the neutral rate that prevailed before the recession," he added.

Data from the Office for National Statistics showed that the UK budget deficit narrowed in April.

Public sector net borrowing, excluding public sector banks, decreased GBP 1.6 billion to GBP 7.8 billion in April. This was the lowest April net borrowing since 2008. The expected level was GBP 8.5 billion.

The currency was trading in a negative territory against its major opponents in the Asian session, with the exception of the euro.

The pound appreciated to a 4-day high of 1.3491 against the greenback, from a low of 1.3413 hit at 2:30 am ET. The next possible resistance for the pound is seen around the 1.36 level.

Having fallen to near a 2-month low of 1.3367 against the Swiss franc at 12:30 am ET, the pound reversed direction and climbed to 1.3434. Next key resistance for the pound is likely seen around the 1.36 level.

Following a 5-day low of 148.77 hit at 10:00 pm ET, the pound reversed direction and spiked up to 149.73 against the yen. The pound is poised to challenge resistance around the 151.00 level.

Preliminary data from the Chain Store Association showed that Japan's supermarket sales dropped in April from a year ago.

Supermarket sales, after store adjustment, decreased 1.2 percent year-over-year in April. Before adjustment, sales fell 0.3 percent.

Reversing from an early weekly low of 0.8789 against the euro, the pound strengthened to 0.8758. The pound is likely to find resistance around the 0.86 level.

Looking ahead, at 8:30 am ET, Canada wholesales for March are scheduled for release.

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