Sterling up as Carney warns of earlier rate rise

Sterling has continued its climb on Friday, after Bank of England governor Mark Carney warned that an interest rate hike could happen sooner than markets currently expect.

According to FTAdviser sister title FastFT, at pixel time, the pound was at $1.6981, about half a cent or so shy of its strongest level since October 2008.

The euro has now broken below 80p, a 19-month low.

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Traders are adjusting their expectations for when UK interest rates may start to rise following Mr Carney’s comments during the annual Mansion House speech late on Thursday, in which he warned that households, companies and financial markets must prepare for tighter monetary policy.

In his first hawkish comments since becoming BoE governor almost a year ago, Mr Carney stressed on Thursday evening that the widely anticipated action by the central bank this month to cool the housing market will not be a substitute for gradual interest rate rises.

“There’s already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced,” Mr Carney said.

The governor’s remarks will heighten expectation that the BoE will be the first major central bank to raise rates since the immediate aftermath of the financial crisis.