Sterling rises after BOE comments on rates raise

European Stock Markets

Sterling rose on Monday after comments from the once-dovish Bank of England deputy governor reinforced the view that the bank would soon raise rates, while the opposition Labour party’s support for a customs union after Brexit added to the optimism. 

British opposition leader Jeremy Corbyn is due on Monday to support staying in a customs union with the EU after Brexit, a move that could lead to a parliamentary defeat for Prime Minister Theresa May. 

Analysts said Corbyn’s support for a customs union made a so-called “softer” Brexit -- or one in which Britain retains as close as possible ties to the EU after leaving -- more likely, helping reduce Brexit risks that weigh on the pound. 

But it was a hawkish shift in view over the weekend from Deputy Governor Dave Ramsden who had previously voted against the first rate hike back in November that helped sterling. 

Sterling rallied 0.6 percent to $1.4047, while against the euro the pound rose 0.3 percent to 87.79 pence per euro. 

MUFG analyst Lee Hardman said Ramsden’s comments were crucial for sterling because he had been among the most dovish members of the BoE, and would help the market price in a rate hike in May and another later this year. 

Analysts said that while risks remained, the market was growing more confident Britain could secure itself a transition deal ahead of or at an EU leaders summit next month.