NEW YORK (AFP) – The British pound edged higher Thursday despite a bearish outlook and warning over the consequences of Brexit from the Bank of England.
But the dollar was stronger against the euro and yen as two Federal Reserve officials laid out stronger arguments for an early interest-rate increase.
The pound, pushing up to $1.4453, could have been expected to weaken as the Bank of England cut its growth forecast for this year to 2.0 percent, saying the economy had already slowed partly due to the possibility the country would pull out of the European Union.
BoE Governor Mark Carney meanwhile said that should Britain vote on June 23 to leave the European Union, the country risks suffering a “technical recession”, as jobs disappear and the value of the pound slumps.
“Despite these warnings and downgrades, sterling recovered its initial losses quickly as investors view these updates as a stronger reason for Britons to vote to remain” in the EU, said Kathy Lien of BK Asset Management.
The two Fed policy makers, known inflation hawk Esther George, head of the Kansas City Fed branch, and Boston Fed president Eric Rosengren both said the time was nigh to begin raising rates.
That boosted the dollar to $1.1377 against the euro.
“The Fed should be ready to gradually normalize interest rates, perhaps at a pace not currently anticipated by the federal funds futures market,” said Rosengren in a speech.
That suggested he favors a hike much sooner than the November date the market currently expects.