Fundamental Comment

Sterling rises after BOE Governors’ remarks

Sterling rises after BOE Governors’ remarks

The pound sterling rose during Thursday’s trading against major currencies, supported by remarks from Bank of England (BOE) Governor Mark Carney, which reduced the prospect of an emergency cut in U.K. interest rates.

As of 09:54 GMT, the British resumed its gains for a third consecutive session versus the dollar, trading at its highest level since February 28 at 1.2920.

Not only against the U.S dollar, but also against the euro, as the pound advanced to 0.8653, while the highest level recorded was at 0.8621.

The pound’s good performance is supported by the comments by the current and upcoming Central Bank Governors on how the central bank should deal with the current situation and how to cope with the impact of Coronavirus on the British economy.

BOE Governor Mark Carney said he would wait for more clarity on the Coronavirus before deciding on interest rates, rather than accelerating emergency cuts.

Supporting Carney remarks, Andrew Bailey, the central bank's next governor, said on Wednesday that the Bank of England would wait until it sees clearer evidence of economic damage from the Coronavirus before making any decision to cut interest rates.

Bailey said it is necessary to provide quick assistance to companies whose operations have been disrupted by the spread of the virus around the world.

The upcoming Governor told parliament's Treasury Committee that while the impact of the Coronavirus would be one of his main priorities, he indicated that a move by the Bank of England was not imminent.

Bailey, who heads the Financial Conduct Authority and is due to replace current Bank of England Governor Mark Carney on March 16, said that UK authorities, would need to use other tools to help the economy overcome the damage to supply chains.

However, a growing number of investors are betting that the British central bank will follow the suit of the US and Canadian central banks in lowering interest rates, perhaps before the first scheduled monetary meeting under Bailey's leadership on March 26.

Meanwhile, the dollar index, which measures the performance of six major currencies against the US currency, slumped by 0.32 percent at 96.99. 

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