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Video / 20 August 2014 at 10:46 GMT

GBPUSD jumps on Bank of England split

Ken Veksler
It’s the first split at the Bank of England since 2011; two MPC members voted to raise interest rates in the UK this month, minutes of the Bank of England’s MPC minutes show.

Those members were Martine Weale and Ian McCafferty, seen as the most hawkish, who backed the idea of raising rates to 0.75 percent from 0.5 percent. Bank of England Governor Mark Carney has been labelled an “unreliable boyfriend” over the way he’s handling the prospect of a rate rise. The feeling is that frustration is mounting amongst investors. Manoj Ladwa from TJM Partners told Saxo Bank’s Lea Jakobiak that Carney “hasn’t done himself any favours”, whilst Ken Veksler from Accumen Management says the Governor’s mixed messages are “what’s causing frustration on the markets”.

Most analysts now expect a rate rise in the first quarter of next year. This view was enforced on Tuesday following a fall in the CPI inflation rate. That said, some economists expect the BoE to start tighten policy sooner as things are looking up overall; Britain’s economy is expected to grow by 3.5 percent this year, which would be its fastest rate in a decade, according to the BoE.

Sterling has been losing ground over the past weeks but cable jumped on the split news and was back at 1.6650 on Wednesday morning. Overall, Veksler remains positive on sterling as he thinks markets will now start focusing on economic data, rather than “what Carney has to say.”
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