Investing.com - The pound soared more than one percentage point against most major currencies on Friday following hawkish comments from the Bank of England´s Monetary Policy Committee member Gertjan Vlieghe.
The pound jumped to highs not seen for fourteen months against the dollar, rising above the $1.35 level. At 09:55 GMT, GBP/USD jumped 1.34% to 1.3577.
Speaking at the Society of Business Economists in London on Friday morning. Vlieghe commented that if inflation continues to pressure the economy, then the Bank of England would be in a position to increase the Bank Rate sooner than he had previously anticipated.
According to Vlieghe, the majority of the members of the committee were in agreement that a hike in the historically low interest rates in coming months would be appropriate.
Following the Brexit referendum, Vlieghe, a renowned dove, was the first MPC member to vote for rate cut. He has previously warned of the danger of premature rate hikes.
Gilt yields were at pre-Brexit referendum highs.
Although the Bank of England voted 7-2 to keep rates unchanged at 0.25% on Thursday, the minutes released following the meeting suggested a more hawkish tone and left investors to interpret that rate hike may take place before the end of 2017.
The response to the BoE minutes was a rally in the pound, which continued into Friday and was boosted further by Vlieghe’s remarks.
Following a missile test over Japan by North Korea on Thursday evening the dollar dipped, despite the release of strong inflation data on Thursday afternoon, increasing the chances of a third rate hike by the Federal Reserve. The Fed are scheduled to meet on Wednesday, investors will be watching for hints to confirm this.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.16% at 91.89.
Sterling made considerable gains against the euro. EUR/GBP plunged 1.14% to 0.8795.
Safe havens saw increased demand on Friday following the missile launch. However, the pound showed its strength as it climbed higher against the typical safe haven currencies. {\{11|GBP/JPY}} jumped 2.27% to 151.08, while GBP/CHF jumped 1.12% to 1.3048.
The pound made similarly strong gains against commodity currencies. GBP/AUD was 1.6934, an increase of 1.16%. GBP/NZD edged up 0.70% to 1.8637.
GBP/CAD was up 1.23% to sit at 1.6502.
The pound continued its rally in spite of the reports of a terrorist attack on a train at Parsons Green underground station at rush hour on Friday morning. The Prime Minister Theresa May has confirmed there will be an emergency COBRA meeting at 12:00 GMT.