Sterling nears 5-year high after hitting $1.70 mark

 

The pound smashed through the $1.70 mark today as imminent interest-rate rises and violence in the Middle sent dealers rushing to bet on sterling.

The pound has not traded above the psychological benchmark since August 2009 but reached $1.7011 in trading today with currency markets still reverberating from Bank of England Governor Mark Carney’s warning last week that interest rates could rise sooner than anticipated.

Expectations of a move as soon as November were heightened when outgoing Deputy Governor Sir Charlie Bean said he would “welcome us getting on to the path of normalisation, as a demonstration that the economy is healing” in a weekend interview.

While good for holidaymakers who are heading to the US or the eurozone, a strong pound is bad news for the  UK’s efforts to trade its way to a sustainable recovery.

The push into the pound was accentuated by the latest crisis in Iraq, which kept up pressure on oil prices as well as boosting demand for safe-haven currencies including Japan’s yen and the Swiss franc.

Sterling failed to hold above $1.70 as automated selling instructions kicked in. But Neil Mellor, analyst at BNY Mellon, said the next target for sterling was the August 2009 highs of $1.7050, which, if breached, would leave the pound at the highest level against the dollar since before the collapse of Lehman Brothers in September 2008.

“If it takes that level out there could be quite a significant move,” he said.

MC Markets analyst Michael Hewson added that there could be “fireworks” in currency markets if the August 2009 peak was breached. Currency markets are now focused on the minutes of the Bank of England’s June meeting to be published on Wednesday.

Signs of dissenting votes for interest-rate rises on the nine-strong monetary policy committee could give the pound another kick higher.

Simon Smith, head of research at FxPro, said: “There is a decent chance that we could see at least one member voting for higher rates, which would give further support to sterling at these higher levels.”

None of the MPC has voted for an interest-rate rise since July 2011, although Carney’s U-turn gives the “impression of a central bank which has been running behind the curve”, according to Commerzbank’s Peter Dixon.

The Bank has stressed that interest-rate rises will be “limited and gradual” but some MPC members have said  they might have to start sooner.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project