Sterling made extended gains against the US dollar in Europe on Thursday, testing the one-month high of 1.3007 from the 1.2820 level yesterday, as investors bought the pound on speculation that the Bank of England may begin to tighten monetary policy or perhaps raising rates in the short term future.
The Bank of England Governor Mark Carney said that a rise in interest rates was likely to be needed as the economy comes closer to running at full capacity, and that the central bank would debate the policy action in the coming months, in his press conference yesterday. It appears that the hawkish rhetoric of Mark Carney coincides with the U.S. Federal Reserve in the prospects of raising rates possibly before the year-end.
Despite the inflation data have decline below the Federal Reserve 2 percent target, Fed Chair Janet Yellen has reiterated that the Fed's tightening agenda is on track. BOE Governor Mark Carney also said yesterday that the BOE may need to begin removing or reduce QE stimulus.