Pound pushes up after two policymakers vote again for UK rate hike

LONDON: Sterling rose from a 14-month low against the dollar on Wednesday after Bank of England minutes showed two policymakers continuing to vote for an immediate interest rate rise despite a weakening economic outlook.

There had been some market speculation that either Ian McCafferty or Martin Weale - the two members of the BoE's Monetary Policy Committee who have since August voted for a rate hike - would reverse their support for policy tightening, given recently weaker data and a more dovish tone from the Bank.

But while the other seven MPC members voted again to maintain rates at their record low 0.5 percent, the two hawks stuck to their guns. And some of the others emphasised a risk that spare capacity could be used up more quickly than thought.

The minutes saw sterling reach $1.5701, having hit a low of $1.5590 before their release, though it later lost some of that ground, last trading at $1.5666, up 0.2 percent on the day. Against the euro, sterling also inched up 0.2 percent to 80.05 pence.

"There were a few people around who had thought that it would go to an 8-1 vote, and that it didn't provoked a bit of a relief rally in sterling," said Adam Cole, global head of currency strategy at RBC Capital Markets.

"With that out of the way, we go back to looking at the big dollar moves as being the principle driver of sterling/dollar."

Solid U.S. housing data was seen as supportive of the dollar as it reflects the country's improving economy.

But the main focus for traders now is minutes from the U.S. Federal Reserve's latest policy meeting due later in the day, with many expecting the minutes to echo a slightly more hawkish tone struck in a statement after the Fed's October meeting.

For the UK, money market rates have pushed out expectations for a rate rise into the second half of next year, with forward rate markets and short sterling futures only fully pricing in a 25 basis point move in the final quarter.

"That broad picture has not changed: from being set to be one of the first to raise interest rates, the BoE is now firmly back in the pack," said Paul Robson, a currency strategist at RBS in London.