FX round-up: Sterling ahead as BoE's Haldane hawkish on UK rates

Sterling put in an unfamiliar positive performance on most key crosses Wednesday thanks to a hawkish jawbone on UK interest rates by Bank of England chief economist Andy Haldane.

He said he would likely vote for a rate rise later in 2017, this comment apparently flying in the face of a more dovish BoE governor Mark Carney yesterday.

Carney said he wanted to see how the economy coped with Brexit talks before considering a rate rise. Last week, the BoE's policymakers voted 5-3 to keep interest rates unchanged.

At 17:04 BST, sterling was up 0.29% to $1.2666, and it rose 0.19% to €1.1365. It was up against the key commodity currencies and the yen, too.

"In flew Haldane on a pretty massive hawk ... stating that 'such a tightening is likely to be needed well ahead of current market expectations'," said Connor Campbell at Spreadex.

He said the question now was whether incoming policymaker Silvana Tenreyro, who replaces the departing Kristen Forbes, would join the hawks or the doves.

"If she picks up where the hawkish Forbes left off, and Haldane votes in line with the contents of his speech, the central bank could be looking at a 4-4 summer split.

"If not then Carney may continue to get his way until the end of the year and beyond."

David Madden at CMC Markets UK said Haldane believed there was a risk of tightening rates either too early or too late.

"The pound was at its lowest level versus the US dollar since April this morning, but Mr Haldane’s comments squeezed the sellers and brought in some buyers," said Madden.

This all followed the Queen's Speech earlier in the session, which was mostly focused on Brexit, immigration, customs, trade, counter-terrorism and infrastructure.

James Hughes at GKFX said the market had heard the Queen's Speech without the UK having a fully functioning government in place. The Tories were still in talks with the DUP.

"The speech painted a grim, complicated and overall confused picture of what is (PM) Theresa May's rather disjointed vision of Britain," he said.

"However Theresa May is increasingly looking like a woman losing her grip of not only her premiership, but the support of her party and the people that voted for her."

Meanwhile, this morning the Office for National Statistics confirmed UK public borrowing fell more than expected in May, providing encouraging reading for Chancellor Philip Hammond.

Across the Atlantic, the dollar was mixed. It was up on the aussie, loonie, kiwi and yen, but down on the rand. It fell 0.08% to €0.8974.

"The EUR/USD is creeping higher today but volatility is low as there were no major economic announcements out of the eurozone," said Madden.

"Traders of the euro are looking ahead to Friday, when France, Germany and the Eurozone will release the 'flash' manufacturing and services PMI reports."