Pound Reaches Seven-Year High Versus Euro Before BOE Testimony

The pound strengthened to a seven-year high versus the euro before Bank of England officials including Governor Mark Carney testify to lawmakers on the central bank’s latest economic forecasts. 

At the Inflation Report press conference on Feb. 12, Carney presented projections that showed the rate of inflation dropping below zero in coming months.

Minutes from the central bank’s February meeting released on Feb. 18 showed that officials saw consumer prices rising “fairly sharply” next year. The same day, 10-year government bond yields reached the highest level this year and sterling touched a six-week high versus the dollar.

“Having already seen a reaction in terms of higher U.K. yields and stronger pound two weeks ago when the post-Inflation Report comments were delivered, we expect a similar tone but less of a market reaction this time,” BNP Paribas SA analysts, including London-based global head of foreign-exchange strategy Steven Saywell, wrote in an e-mailed note. “With the euro-pound approaching 0.73 target we continue to aim to take profit at that level.”

The pound appreciated 0.2 percent to 73.22 pence per euro at 9:53 a.m. London time on Tuesday and touched 73.17 pence, the strongest level since January 2008. Sterling dropped 0.1 percent to $1.5436. The U.K. currency climbed to $1.5480 on Feb. 18, the highest since Jan. 2.