Investing.com - The pound jumped higher against the dollar on Wednesday, rising above the $1.29 level after Bank of England Governor Mark Carney appeared to alter his forward guidance on interest rates.
GBP/USD hit highs of 1.2965, the most since June 9 and was at 1.2949 by 10.08 ET (14.08 GMT), up 1.05% for the day.
The pound jumped after Carney said some removal of monetary stimulus is likely to become necessary as spare capacity in the economy erodes.
Speaking at a European Central Bank forum in Portugal, Carney said that policymakers would need to look at the extent to which stronger business investment is offset by weaker consumption, as well as growth in wages and labor costs.
“These are some of the issues that the MPC will debate in the coming months,” Carney said.
“Some removal of monetary stimulus is likely to become necessary if the trade-off facing the MPC continues to lessen and the policy decision accordingly becomes more conventional.”
The BoE’s monetary policy committee was split 5-3 at its meeting earlier this month on whether to raise interest rates from a record-low 0.25%. Carney voted to keep rates unchanged.
The euro fell to the day’s lows against sterling following the remarks, with EUR/GBP hitting 0.8772. It was last at 0.8788.
The euro had already come under pressure after the European Central Bank said Wednesday that the market misinterpreted remarks by President Mario Draghi a day earlier.
Speaking at the ECB’s forum on Tuesday, Draghi said factors weighing on inflation in the euro area were mainly temporary, adding that the bank could look through them.
The remarks fueled speculation that the ECB could soon unwind its quantitative easing program.
The euro was trading at one-year highs against the dollar, with EUR/USD up 0.38% to 1.1384.
The euro initially turned lower against the dollar, before recovering, moving in lockstep with sterling.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.46% at 95.75, the lowest trough since October 3.