LONDON: Sterling jetted higher on Wednesday, supported by more suggestions from the minutes of the Bank of England's last meeting and a magazine interview that policymakers are edging towards voting for an interest rate rise.
There have been a handful of indications this month of a changing of the tide at the bank and the minutes of the meeting on July 8 showed "a number" of policymakers viewed the decision on whether to raise rates as "becoming more finely balanced".
All nine members of the Monetary Policy Committee still voted in favour of keeping rates on hold at a record low 0.5 percent but traders took it as confirmation of the change in tone and pushed the pound higher.
As the day wore on, the pound broke below 70 pence against a weakened euro, almost 1 percent stronger, while gaining around half a percent against the dollar to trade at $1.5635.
"Long GBP remains attractive after the minutes today," analysts from Citi wrote in a note. "Minutes did show a number of MPC members concerned about the rising inflationary pressures and that caused sterling to go bid." All 17 economists in a Reuters poll had predicted the MPC would remain united in voting for no change in rates in July.
But the minutes said the "very material factor" of Greece's debt stand-off had influenced policymakers' vote to keep rates on hold. "Because of the timing of the meeting, there was much more uncertainty around Greece, so it would have been unusual for one of the dissenters to dissent at that meeting," BNP Paribas FX strategist Sam Lynton-Brown.
The unity among the BoE's rate-setters is expected to end in two weeks' time when the Bank publishes a quarterly update of its forecasts for Britain's economy.
MPC member David Miles, once one of the strongest advocates for providing more stimulus for the British economy, said last week that holding off on a rate hike for too long would be "a bad mistake".
In an interview published on Wednesday, Miles, who steps down from the MPC next month, said the time for a hike was nearing and that it was "highly likely" rates would continue to rise over the next few years.
He would not say how he intended to vote in his final MPC meeting, having never voted for an interest rate hike since joining the BoE in 2009. Fellow MPC member Martin Weale has suggested he will vote to raise rates soon.
"The pound spiked 50 pips this morning after Miles said that the time is coming for Bank Rate to start rising," RBC Capital Markets strategists wrote in a research note "A 9-0 vote for unchanged rates in July could well give way to a 6-3 split in August. For euro/sterling, diverging policy paths that are beginning to emerge should keep the pair under pressure, and our forecast is for 68 pence by Q2 2016."
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