The pound fell on Friday after Bank of England Governor Mark Carney shook the market’s confidence in an early interest rate hike, dealers said.
“Carney put an end to the debate, saying that markets should not bet on a May rate rise,” noted Jasper Lawler, head of research at London Capital Group.
Markets had been widely pricing in a quarter-point interest rate hike in May, to 0.75 percent, amid a pick-up in UK wage growth, but British economic data this week, including a sharp drop in retail sales, had started to dampen those expectations.
The general path
“Prepare for a few interest rate rises over the next few years,” Carney told the BBC. “I don’t want to get too focused on the precise timing, it is more about the general path.”
Higher interest rates typically boost a currency as holding it generates higher returns for investors.
“While Carney did not deviate from the view that gradual rate hikes are going to be necessary, he did cast…