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Sterling remains strong

Written by Business World, on 19th Feb 2015. Posted in EU

article headlineSterling trade-weighted index hovered near a six-year high on Thursday, boosted by gains against the dollar as the interest rate gap between U.S. Treasuries and British gilts narrowed. The yield spread between rate-sensitive two-year Treasuries and their British counterparts narrowed after minutes of January's Federal Reserve policy meeting showed officials were concerned about hiking interest rates too soon. In contrast, data showed British wages growing strongly, outstripping inflation by the widest margin since before the financial crisis. Minutes from the Bank of England's latest policy meeting also showed two BoE policymakers voted to increase rates in the second half of the year. Sterling was up 0.15 percent against the dollar at $1.5460 , having hit a seven-week high of $1.5480 just after the Fed minutes were released. Those gains kept trade-weighted sterling index at 90.5, not far from its six-year high of 90.7 struck on Wednesday. It lagged gains seen in the euro, though, and was last trading at 74 pence per euro, down around 0.2 percent. The euro had sunk to a seven-year low of 73.48 pence on Wednesday and traders said the common currency's gains were likely to be temporary given risks from the Greek debt talks and the start of an asset-buying programme by the European Central Bank next month. British interest rates have been at a record low of 0.5 percent for six years, and investors reckon they could stay there for at least a year due to low inflation. But with wages picking up strongly and recent data showing that manufacturing, construction and services sectors all growing at a robust pace, some analysts reckon the BoE may have to tighten policy before the market anticipates. (Reuters) For more visit: www.businessworld.ie

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