Sterling climbs to 3-week high, FTSE drops on Carney rate hike signal

Britain’s main FTSE 100 stock index dropped on Wednesday, after Bank of England Governor Mark Carney said the bank was likely to need to hike interest rates and would debate this “in the coming months”.

The pound climbed a cent to $1.2943 after the speech’s release, its strongest since June 9, the day of the results of Britain’s parliamentary elections. That left sterling up around 1 percent on the day.

Sterling also jumped 0.8 percent to 87.735 pence per euro.

British government bond futures fell by 60 ticks after the BoE released the remarks and yields on 10-year gilts rose by 9 basis points to 1.184 percent, their highest since May 11. Five-year yields hit their highest since May 29 at 0.636 percent and two-year yields struck an eight-month high of 0.325 percent.

Britain’s FTSE 100 extended losses to trade 0.4 percent lower, while mid caps were down 0.2 percent.

Speaking at a European Central Bank conference in Portugal, Carney said policymakers would need to look at the extent to which stronger business investment offset a slowdown in consumption, as well as growth in wages and labor costs.

Source: Reuters