Sterling retakes $1.50 after BoE minutes

The pound moved higher on Wednesday as investors pointed to hawkish signs within the minutes from the Bank of England's April monetary policy committee (MPC) meeting.

The MPC voted unanimously to keep interest rates on hold at historic lows, with two members saying their decision was "finely balanced."

Sterling reached a day-high of $1.5013 after the release of the minutes, taking it up 0.6 per cent on the session and up from $1.4931 immediately beforehand. It was only the second time since March 18 that the pound has traded above $1.50.

"The BoE slipped in a comment that seems to indicate markets are being too relaxed about the timing of upcoming rate hikes," said Enrique Diaz-Alvarez, chief risk officer at Ebury.

The phrase 'the path of bank rate expected by financial markets was now exceptionally flat' is, I think, driving the positive reaction in sterling."

Sam Hill, senior UK economist at RBC Capital markets, said the minutes added "a hawkish tinge" to exchange rate analysis.

"Looking ahead, there is the possibility of less downward pressure to come than previously thought from the strength of sterling. Combine that with the reversal in the base effects from the fall in energy prices later this year and it is possible to imagine that the bank could envisage a faster pickup in inflation."

Nonetheless, analysts were not predicting any short term action from the bank, not least with the UK general election just over two weeks away, and likely to be followed by a period of coalition building.

Looking further ahead, Sam Alderson, economist at the Centre for Economics and Business Research, said: "With the subdued outlook for exports and inflation likely to remain relatively weak until much later in 2015, we don't expect the MPC to raise rates until early 2016."

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