Pound Jumps as BOE’s Forbes Damps Prospect of Further Stimulus
(Bloomberg) -- The pound rose after Bank of England policy maker Kristin Forbes said she doesn’t see the need for further stimulus just yet.
While Forbes is well known for her hawkish stance on policy, her words had an effect, and sterling extended its advance from a five-week low against the dollar. She told Bloomberg that the central bank may have miscalculated the impact of Brexit-related uncertainty and might need to revise up its economic outlook.
Traders “weren’t really expecting what she said,” said Stuart Bennett, head of Group-of-10 currency strategy in London at Banco Santander SA. Forbes “might not be voting for more stimulus in mid-November or early February. Her comments probably shouldn’t be that much of a surprise, but when you’re looking for any reason to buy the pound, she provides it.”
Sterling was already higher after the Federal Reserve maintained the status quo on U.S. interest rates and scaled back the outlook for increases beyond this year in its policy announcement on Wednesday.
The U.K. currency climbed 0.6 percent to $1.3105 as of 4:20 p.m. London time, a day after sliding to $1.2946, the lowest since Aug. 16. It was little changed at 85.80 pence per euro.
Futures markets are pricing about a one-in-four chance of a BOE rate cut by the end of the year, data compiled by Bloomberg show. There’s speculation that “the case for a further interest-rate cuts has now disappeared” following Forbes’s comments, said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London.
The market’s “thinking there may not be another cut in the pipeline” and that’s driving sterling higher, he said.