Since the Brexit vote, the pound has supposedly touched its highest level against the greenback, following a fuelled speculation by Bank of England senior official about the rise in rates in the near future. Hinting a rise in the coming months, last week, the Bank had held rates at a 0.25%. The sterling has hit a US$1.3610, rising above a 1.0% against the greenback. This had been presumably the highest level since the day after the Brexit vote, i.e. June 24, 2016. The sterling has also attained an over 1.1% against the euro to reach a €1.137 on Friday night. As soon as November, the Bank could increase rates back to a 0.5%, the level they were at prior to the European Union (EU) referendum.
Higher Rates to Raise Mortgage Costs for Homeowners but Benefit Savers
At the beginning of the last week, a 20.0% chance of the rise in the Bank rate in November had been predicted by the futures markets. However, allegedly the highest since the Brexit vote, a 63.0% chance has been anticipated by markets tracking investors’ expectations. Hitting 15-month highs on Friday, the return on government bonds have often been impacted by interest rate expectations. Apparently the highest since the day of the Brexit vote, a 0.772% has been hit after rising to a 7 BPS by the yield on five-year U.K. bonds.
Gertjan Vlieghe has said that the Bank rate rise could find the coming months as “the appropriate time” if robust global growth, strengthening household spending, increasing pay pressure, and reducing slack continue. For the case of a hike, there seems to be more unanimity and a concerted effort by the Monetary Policy Committee, according to Howard Archer.