Pound sterling hits seven-month high ahead of Bank of England’s ‘Super Thursday’

Sterling is still one of the worst performing major currencies over the last year, largely as a result of uncertainty unleashed by the Brexit vote

The pound has added more than 3 per cent against the US dollar since Theresa May last month said that she would be calling a general election (Thomson Reuters Eikon)

The pound hit its highest level in over seven months of Wednesday, as investors’ attention turned to the Bank of England’s quarterly ‘Super Thursday’ where it’s due to reveal its economic outlook, latest interest rate decision and publish minutes of the most recent policy meeting.

Sterling is still one of the worst performing major currencies over the last year, largely as a result of uncertainty unleashed by the Brexit vote, but it’s added more than 3 per cent against the US dollar since Theresa May last month said that she would be calling a general election – something which strategists said has the potential to strengthen her hand in Brexit negotiations.

On Thursday morning, the pound was trading around 0.4 per cent higher on the day, just short of the psychologically important $1.30 mark, before retreating slightly to end the day around $1.293.

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Strategists at Societe Generale wrote in a note that pricing of a rate hike at Thursday’s BoE meeting, something which would be expected to support the pound, “is still tiny, as indeed is the case for the next three meetings”. They added, however, that “any hint of a hawkish bias in [monetary policy committee] comments can be latched onto” and that this might be driving the pound higher on Wednesday.

Neil Wilson, an analyst at ETX Capital said that there had been “some chatter that the Bank might err towards talking up the inflation impact” which in turn could lead to more MPC members calling for a rate hike.

In April, Michael Saunders, an external member of the Bank’s MPC, laid out a potential case for a hike in UK interest rates. Mr Saunders, who joined the MPC last August, said he thought GDP growth and inflation in 2017 could come in higher than the Bank forecast in February.

He also stressed that the 0.25 per cent Bank rate was already "accommodative".

In March's MPC meeting Kristin Forbes, another external member, voted to raise interest rates to 0.5 per cent. That was the first split on the MPC over rates since July last year.