Pound to Test 6 Year High on Interest Rate View

The pound is poised to test a six year high versus the dollar, as futures traders increased bets it will strengthen after the currency fell too far, too fast. The currency reached its most oversold level since March 2013 this month as it dropped 1%, the worst performance among major currencies. Sterling dipped to a four month low on 14th August, breaching its 200 day moving average, after Bank of England Governor, Mark Carney said policy makers are focused on ‘weak wage growth’ in gauging interest-rate increases. It has tumbled 2.7% since touching $1.7192 on 15th July, its highest level since October 2008.

Despite the warning on rates, traders still see the British central bank’s odds of increasing its benchmark by year-end at 23%, compared with 1% odds for the U.S. Federal Reserve, overnight-index swaps data show. The currency advanced 0.2% yesterday, the most in two weeks, after Carney told the Sunday Times newspaper officials may lift borrowing costs before seeing a recovery in wages.