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Sterling strengthens above $1.34 on Carney rate comments

The pound climbed nearly 1.5 per cent to hit a fresh one-year high after Bank of England Governor Mark Carney was quoted as saying the probability of a rate increase has “definitely increased.”

The report from Reuters quoted Mr Carney as saying the BoE is talking about a “modest” increase in interest rates. The BoE did not immediately respond to an email requesting comment on Mr Carney’s remarks.

Sterling was up 1.5 per cent at $1.3404 at pixel time – the highest level in over a year.

The currency had been jolted higher this afternoon after the BoE signaled that a rate increase may be on the horizon.

“It was the communication change that was needed to open up the market to the idea of a November hike and today we have had it,” said Jordan Rochester at Nomura. “The market’s inherent short [the pound] view with a possible BoE hiking cycle on the horizon will be questioned and, in our view, will be reduced.”

Mr Rochester added that the currency may rise as high as $1.40 by the end of the year, representing a gain of about 4.7 per cent from current levels.