Published: Fri, June 30, 2017
Medical | By Dorothy Lyons

Financials Up As Central Banks Talk Hikes - Financials Roundup

Financials Up As Central Banks Talk Hikes - Financials Roundup

The pound jumped almost 1% after the Governor of the Bank of England suggested that interest rates could rise if business investment grows.

Cunliffe came to the support of the governor, Mark Carney, in saying that it was not yet time to raise interest rates - setting the scene for one of the most closely fought decisions of the Bank's monetary policy committee when it meets early next month.

Mr Carney said it would depend on "how the economy reacts to both tighter financial conditions and the reality of Brexit negotiations".

"These are some of the issues that the MPC [Monetary Policy Committee] will debate in the coming months", Carney said.

'If the markets do start to feel that a rate rise is going to happen, don't expect the record-low mortgage rates now available to hang around.

However with a number of other central bank's such as the European Central Bank (ECB) and the Bank of Canada (BOC) appearing to indicate that they are looking at the possibility of tightening monetary policy the "Greenback" has found itself without its unique selling point. "And I want to see how that plays out", he said. "[It is] the closest the country has been to a rate hike since the days of the financial crisis", he added.

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If other BoE officials speak in favour of higher United Kingdom interest rates then the Pound could appreciate, but for now, the "will-they won't-they" outlook on the BoE MPC remains as unclear as ever.

Shortly after the Haldane's comment the other officer, Sterling rose on Wednesday as the investors were forced to reexamine the long-held view that interest rates would remain unmoved until well in 2018.

A break above those highs would give a strong bullish signal that the pair was going to continue higher, with an initial target at 1.3025 and then 1.3150, assuming a break above the 1.3051 May highs.

The dilemma facing rate-setters at the Bank is that the pound's slump since the Brexit vote has stoked inflationary pressures by raising import prices at a time when the British economy is slowing, partly on Brexit-related uncertainties.

Britain's exporter-heavy FTSE 100 stock index, which tends to move inversely to the pound, extended losses to trade 0.4 percent lower, while mid caps were down 0.2 percent.

"It is a sensible way for the bank to try to take some of the steam out of the consumer debt growth without immediately impacting the nominal rates paid by mortgage borrowers", said Gregory Turnbull Schwartz, an investment manager at Baillie Gifford & Edinburgh. The pair has also broken above important resistance at 1.2875 which was critical support in the months following the European Union referendum.

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