FXStreet (Barcelona) - Derek Halpenny, European Head of Currency Strategy at the Bank of Tokyo Mitsubishi UFJ, noted the ongoing strength surrounding the GBP.
"We have been arguing for some time that foreign exchange volatility was likely to increase going forward as central bank ‘forward guidance’ begins to crack in certain countries opening up a more obvious divergence between major countries that prompts bigger FX moves. We place the UK followed by the US as the two countries where ‘forward guidance’ will be trumped by incoming economic data that forces yields higher and forces a change in central bank ‘forward guidance’ communications."
"It’s the basis of our EUR/GBP forecast of 0.7500 by March next year. The comment from Governor Carney last night that a rate increase “could happen sooner than markets currently expect” was as direct as you can get and given that the markets were already mostly priced for a Q1 2015 first rate increase, the likely consequence of this comment is that expectations of a Q4 2014 (November probably) will now increase notably."