Pound traders are waiting on a slew of Bank of England data that may bolster the prospect of higher interest rates and extend the currency’s gains.
Sterling climbed against all 16 of its major counterparts in July as a report showed Britain’s economic growth accelerated in the second quarter. The central bank will simultaneously publish new economic forecasts, its next policy decision, minutes of the corresponding Monetary Policy Committee meeting and officials’ votes on Aug. 6.
In July, all nine MPC members voted for no change in the key rate.
“We think that there will be three dissenters, possibly four,” said Enrique Diaz-Alvarez, New York-based chief risk officer at Ebury Partners Ltd., the most-accurate forecaster for sterling versus the euro in the second quarter. “Levels already reflect expectations for a hawkish MPC and inflation report.”
The pound jumped 0.7 percent in the past week to $1.5623 as of 5:55 p.m. London time Friday, the biggest weekly advance since June 19 and cutting its monthly drop to 0.6 percent. It gained 0.5 percent in the week to 70.44 pence per euro.
Ebury, which provides financial services to small- and medium-sized companies, predicts the U.K. currency will appreciate toward its July 17 high of 69.36 pence if three policy makers vote for a rate increase.
Sterling has been whipsawed in recent weeks as investors weighed the timing of a potential rate increase. It touched its strongest level in 7 1/2 years against the euro two weeks ago after BOE Governor Mark Carney said the end of record-low rates was in sight. It dropped the following week and then jumped on July 28 after data showed U.K. gross domestic product expanded for a 10th consecutive quarter.
Forward contracts based on the sterling overnight index average, or Sonia, show traders predict rates will rise in May. That’s three months earlier than implied as recently as July 10.
Even so, U.K. government bonds advanced in the week, with the two-year note yield slipping six basis points, or 0.06 percentage point, to 0.57 percent. The price of the 1.75 percent gilt due in January 2017 rose 0.08, or 80 pence per 1,000-pound face amount, to 101.73.
(Corrects surname of speaker in fourth paragraph of story originally published Aug. 1.)