Pound at highest since Brexit as Bank of England signals rate hike
Sterling touched $1.36 against the greenback – the highest since last July, was trading at $1.35 as of 14:47pm GMT. It was up almost one percent against the euro, at €1.13.
Dragged down by the pound’s gains, the benchmark index FTSE 100 slid 1.06 percent to 7,218.39. A higher UK currency tends to slam the blue-chip index lower, as it impacts the earnings of the multinational companies that make the bulk of their money overseas.
BOE policymaker Gertjan Vlieghe, who has previously argued against a rate rise, said in a speech the "moment is approaching" when interest rates might need to go up.
“Until recently, I thought the appropriate response of monetary policy was to be patient, given modest growth and subdued underlying inflationary pressure. But the evolution of the data is increasingly suggesting we are approaching the moment when bank rate may need to rise,” said Vlieghe.
He pointed to the country’s economy picking up, saying unemployment is falling to record lows, households are spending more and wages are rising in the private sector.
"If these data trends of reducing slack, rising pay pressure, strengthening household spending and robust global growth continue, the appropriate time for a rise in bank rate might be as early as in the coming months," he said.
Analysts say the BOE could lift interest rates back to 0.5 percent, the level they were before the Brexit vote, as early as November.