Pound Soars As BoE Hints At Rate Hike In Coming Months

The pound surged against its key counterparts in the European session on Thursday, after the Bank of England retained its record low interest rate again but sent strong signals that the interest rate hike could come sooner than had been predicted.

The Monetary Policy Committee voted 7-2 to hold the interest rate at 0.25 percent. But all nine members voted to maintain the quantitative easing at GBP 435 billion.

Ian McCafferty and Michael Saunders voted for a quarter point rate hike at the September meeting.

The majority members were of the view that, if the economic growth accelerates, a withdrawal of part of the stimulus injected in August last year would be appropriate over the coming months in order to return inflation sustainably to target.

All MPC members continued to judge that, if the economy were to follow a path broadly consistent with the August Inflation Report central projection, then monetary policy could need to be tightened by a somewhat greater extent over the forecast period than current market expectations, according to the minutes.

Inflation is expected to overshoot the 2 percent target over the next three years. Although underlying pay growth has shown some signs of recovery, growth remains moderate.

The latest survey from the Royal Institution of Chartered Surveyors showed that the U.K. house price balance rose unexpectedly in August.

The house price balance rose to +6.0 in August from +1.0 in July. Meanwhile, it was expected to remain flat during the month.

The pound held steady against its major counterparts in the Asian session, with the exception of the Japanese yen.

The pound appreciated by 1.2 percent to a 6-week high of 0.8936 against the euro, after having fallen to a 2-day low of 0.9044 in the immediate aftermath of the announcement. The pound is likely to locate resistance around the 0.88 area.

The pound reversed from its recent 6-day low of 1.3150 against the dollar, rising as high as 1.3307. The pound is poised to find resistance around the 1.34 mark.

The pound added 1.4 percent to hit near a 2-month high of 147.27 against its Japanese yen, following a 2-day low of 145.17 set soon after the BoE release. Further gains may take the pound-yen pair to a resistance around the 151.00 zone.

The latest figures from the Ministry of Economy, Trade and Industry showed that Japan's industrial production declined as initially estimated in July.

Industrial production dropped a seasonally adjusted 0.8 percent month-over-month in July, reversing a 2.2 percent rise in June. That was in line with the flash data published on August 31.

The pound breached the 1.28 mark against the franc, approaching a 4-month high of 1.2887. This marks a 1.4 percent rise from a 2-day low of 1.2715 hit just immediately following the BoE decision. On the upside, 1.33 is possibly seen as the next resistance for the pound.

The Swiss National Bank maintained its expansionary monetary policy and upgraded its inflation projections.

The interest rate on sight deposits at the SNB was retained at -0.75 percent and the target range for the three-month Libor was kept unchanged between -1.25 percent and -0.25 percent.

Looking ahead, U.S. weekly jobless claims for the week ended September 9, U.S. CPI data for August and Canada new housing price index for July are slated for release in the New York session.

At 11:30 am ET, Deutsche Bundesbank President Jens Weidmann is expected to speak about monetary policy after a crisis at Goethe University, in Frankfurt.

At 12:00 pm ET, European Central Bank Executive Board Member Yves Mersch will participate in closing session "Economic and Financial Priorities for relaunching the Eurozone and the EU" at Eurofi Financial Forum 2017 "What way forward for the EU27 and Eurozone?" in Tallinn.