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Forex News: Pound Higher After BoE Vlieghe Signals Rate Hike

Pound Higher After BoE Vlieghe Signals Rate Hike In 2022

05/27/2021 - 10:11:00 (RTTNews)

(RTTNews) - The pound spiked higher against its major opponents in the European session on Thursday, after a Bank of England policymaker hinted at a rate hike next year, though it could happen earlier if the economy rebounds quickly.

Speaking at the University of Bath, Gertjan Vlieghe said "the first rise in bank rate is likely to become appropriate only well into next year, with some modest further tightening thereafter".

It would probably take until the first quarter of next year to have a clear view of the post-furlough unemployment and wage dynamics, so a rise in bank rate could be appropriate soon after, Vlieghe noted.

If the transition out of furlough happen more smoothly and the unemployment is low, an earlier rise in bank rate would be appropriate, he added.

Vlieghe, who is set to leave the Monetary Policy Committee in August, said that he broadly agreed with BoE forecasts issued earlier this month, but cautioned that spare capacity in the economy would be difficult to reduce.

Data from the Society of Motor Manufacturers and Traders showed that UK car production increased sharply in April compared to the pandemic hit month in 2020 but remained below its 2019 level.

Factories manufactured 68,306 cars in April compared to just 197 a year ago when Covid restrictions effectively halted manufacturing.

The pound jumped to 155.29 against the yen, its highest level since February 2018. If the pound extends rise, 157.00 is possibly seen as its next resistance level.

The pound advanced to a 6-day high of 1.2762 against the franc and a 3-day high of 0.8598 against the euro, off its early lows of 1.2655 and 0.8647, respectively. On the upside, 1.30 and 0.84 are possibly seen as its next resistance levels against the franc and the euro, respectively.

The pound rose to a 2-day high of 1.4183 against the dollar, from a 10-day low of 1.4092 hit at 9:15 pm ET. The pound is seen finding resistance around the 1.43 region.

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