LONDON: Sterling rose against the euro on Wednesday, helped by signs of rising personal incomes, although British interest rates are still expected to remain near record lows until the second half of 2015.
That kept the pound subdued against the dollar, and more losses against the U.S. currency are possible once the Federal Reserve ends its policy meeting later on Wednesday. Attention will focus on whether the Fed drops the phrase "considerable time" from any discussion of when interest rates might rise.
That would imply rates were likely to go up in the middle of next year, well before the Bank of England is expected to move, boosting U.S. yields and the dollar. The yield gap between two-year U.S. Treasuries and British gilts was near its highest in two years, Reuters data showed.
The euro was down 0.2 percent against the pound at 79.24 pence, while the pound was down 0.2 percent at $1.5715 against the dollar. The U.S. currency held its gains even though data showed U.S. consumer prices fell more than expected in November.
Sterling had hit a three-week high of $1.5785 on Tuesday after BoE Governor Mark Carney played down data released on Tuesday that showed UK inflation fell to a 12-year low in November.
On Wednesday, another report showed British average weekly earnings, excluding bonuses, rose 1.8 percent compared with the same month last year, unchanged from September. It also showed the unemployment rate was unchanged at 6.0 percent in the three months to October, matching its six-year low but slightly above a forecast of 5.9 percent in a Reuters poll.
"The wages data is positive for sterling, but for most traders the focus is on the Fed. They do not want to move much ahead of that," said Nawaz Ali, analyst at Western Union.
Minutes from the latest BoE Monetary Policy Committee meeting showed a majority on the MPC still favoured leaving interest rates on hold. Two of the nine members continued to vote for rate hikes.
"Investors know the outlook for inflation is going to continue to move lower over the coming months, which means the BoE's strong views on weak price pressures are likely to intensify," said Jameel Ahmad, chief market analyst for FXTM.
Gilt prices edged higher, tracking Treasuries after unexpectedly weak U.S. inflation data. At 1400 GMT, the 10-year gilt yield was down 2 basis points on the day at 1.76 percent.
Comments
Comments are closed for this article.