The pound advanced to the strongest level in 5 1/2 years against the dollar this week as bets the Bank of England is moving closer to increasing its benchmark interest rate fueled demand for the U.K. currency.
The yield difference between U.K. two- and 30-year government bonds shrank to the least in five years as comments by the Bank of England’s David Miles fueled bets policy makers are moving closer to raising interest rates.
The pound fell for the first time in five days against the dollar after U.K. inflation dropped to its lowest rate in 4 1/2 years in May, damping speculation the Bank of England will raise interest rates sooner than forecast.
U.K. government bonds fell for a fourth day, pushing two-year yields to the highest since 2011, as comments by the Bank of England’s David Miles fueled bets policy makers are moving closer to raising interest rates.
Bank of England policy maker David Miles said the lingering impact of the financial crisis on investment decisions means policy makers may have to limit how high they increase their key interest rate in the coming years.