GBP/USD: best week in years

The pound is about to end the week sharply higher across the board, posting the biggest gain in years. GBP/USD gained almost 400 pips and closed at the highest level since the Brexit referendum. 

BoE rate hike looms, GBP soars 

The dramatic change in rate hike expectations from the Bank of England fueled the rally of the pound. On Tuesday, inflation data from the United Kingdom showed higher-than-expected numbers. The BoE took note and signaled that rates could rise sooner than expected, boosting expectations of a rate hike before year-end, despite the 7-2 vote in favor of keeping rates unchanged. 

Today,  Gertjan Vlieghe, member of the Monetary Policy Committee added more fuel to the rally of the pound after mentioning that “we are approaching the moment when bank rate may need to rise”. Vlieghe, a usual dove, is a strong signal of the shift in the BoE bias toward the removal of some stimulus. 

BOE’s Vlieghe: Appropriate time for rate hike might be as early as in the coming months

Cable peaked on Friday at 1.3615 and then pulled back modestly to the 1.3560, validating weekly gains. From the level, it had a week ago rose more than 350 pips and since the beginning of the month has risen 650 pips or 4.95%. 

GBP/JPY gains 5.70% in 5 days 

The opposite of the pound during the week was the yen. The Japanese currency tumbled amid an improvement in risk appetite and rising bond yields. GBP/JPY was the biggest gainer over the week among the most traded pairs. 

The pound rose more than 800 pips against the yen, breaking long-term resistance levels during the rally. It also rose above the 1.5000 psychological area for the first time since June 2016.