FXStreet (Bali) - GBP/USD continues on fire well above the 1.69 handle, having printed a day high of 1.6927 following the hawkish comments by BoE Governor Carney, who hinted at increasing rates sooner rather than later.
Mark Carney told households, companies and financial markets that the tightening cycle “could happen sooner than markets currently expect”. Mr Carney also outlined that measures to cool down the housing market in the UK will act as a substitute for gradual rate rises.
The comments by Mr. Carney have caused very solid demand in the GBP in thinned markets, in what looks to be an illiquid overshoot. That said, there is no doubt that today's comments by the BoE Governor should see the market starting to bring forward market expectations for a rate hike, which before the headlines were around spring 2015. Will the market now expect rate rises in the UK by late this year?
“There’s already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced,” Mr Carney said.
Carney added, in an attempt to justify future rate hikes, that “growth has been much stronger and unemployment has fallen much faster than either we or anyone else expected.”
“The need for internal balance – to use up wasteful spare capacity while achieving the inflation target – will likely require gradual and limited interest rate increases as the expansion progresses. The start of that journey is coming nearer,” he added.