Pound Rises Amid BoE Rate Hike Speculation

(RTTNews) - The British pound strengthened against other major currencies in the European session on Friday, as traders await the widely anticipated interest rate increase by the Bank of England next week.

The Bank of England, which will make its monetary policy announcement next week, has drawn the attention of investors. The UK economy is still expanding, according to recent macroeconomic statistics, but inflation is still far higher than the bank's target. As a result, markets have almost completely priced in a 25-basis point rate increase for next week.

Despite the enormous level of public debt and the unrest in bond markets, pound traders continue to celebrate a neutral UK budget. For the time being at least, the budget appears to have calmed markets. Since the budget was announced on Wednesday, the yield on the UK 10-year bond has decreased by over 10 basis points, giving the pound a new lift.

In economic news, U.K. Nationwide Housing Prices stayed unchanged in October, exceeding forecasts of a 0.2 percent contraction and coming after a 0.3 percent drop in September.

In the European trading today, the pound rose to more than a 1-1/2-year high of 0.8340 against the euro, a 1-1/2-month high of 1.3425 against the U.S. dollar and an 8-day high of 211.34 against the yen, from early lows of 0.8365, 1.3376 and 210.57, respectively. If the pound extends its uptrend, it is likely to find resistance around 0.82 against the euro, 1.35 against the greenback and 214.00 against the yen.

Against the Swiss franc, the pound advanced to 1.1035 from an early 1-week low of 1.0985. On the upside, 1.11 is seen as the next resistance level for the pound. Looking ahead, Eurozone GDP data for the third quarter is due to be released in the European session.

In the New York session, Canada GDP data for August, U.S. employment cost - benefits for the third quarter, Germany CPI data for October, U.S. Chicago PMI for October and U.S. Baker Hughes oil rig count data are slated for release.