STERLING ended the week by surging to a two-month high against a basket of other currencies, as financial markets registered doubts about the Bank of England's ability to hold benchmark interest rates at a record low for three years.
These doubts have been fuelled by a recent run of stronger UK economic data, and details of the "forward guidance" unveiled by the Bank of England's Monetary Policy Committee (MPC), chaired by Bank of England Governor Mark Carney.
Sterling yesterday matched its June 17 peak on its trade-weighted index against a basket of currencies. It also remained strong against the dollar. The pound hit an intra-day high of $1.5657 during the session, its strongest level against the greenback since June 19.
Sterling eased later but ended nearly half-a-cent higher on the session at $1.5619. The MPC said this month it did not intend to raise base rates from 0.5% at least until the International Labour Organisation measure of unemployment had fallen to a "threshold" of 7% - something it is not projecting to happen until 2016.
This guidance from the MPC on rates would cease to hold if, in the committee's view, it were more likely than not that annual CPI inflation 18 to 24 months ahead would be 0.5 percentage points or more above the 2% target. It would also cease to apply if medium-term inflation expectations no longer remained sufficiently well-anchored.
UK base rates have been at 0.5% since March 2009.
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