FX round-up: Sterling continues hawk-inspired run higher

Sterling continued its hawk-inspired run higher against a basket of currencies and in particular against the US dollar.

Its rise came after Bank of England chief economist Andy Haldane told the BBC that the central bank needed to "look seriously" at the possibility of raising rates.

This followed his apparently dove-turned-hawk boss Mark Carney yesterday declaring UK interest rates might need to be hiked.

At 17:10 BST, sterling was up 0.42% to $1.2980, and up 0.05% to €1.1366. It was down on the aussie, but ahead on the loonie, kiwi, rand and yen.

"There has certainly been a more hawkish tilt to UK and Eurozone monetary policy," said Joshua Mahony, market analyst at IG.

"For the BoE it comes down to whether they are driven by their core mandate of price stability or whether they are willing to tolerate a bout of above target inflation with the aim of remaining supportive of the economy during a testing transitional period.

"With wage growth likely to remain sluggish, and prices driven higher by rising import prices, it is clear that the BoE are in a tough spot on whether to help the economy or try to improve real income growth," Mahony said.

David Madden, market analyst at CMC Markets UK, said sterling's rise came as traders continued to take their cues from Carney's Wednesday comments.

"The pound traded above the $1.30 mark today -- a level not seen since late May.

"Some dealers feel that Mr Carney was too hasty in further easing the BoE's monetary policy in the wake of Brexit, and now he appears to be adding some stability to the pound."

Meanwhile, the dollar-spot index was down 0.29% to $95.736. The greenback was down up on the kiwi, rand and yen, but down on the aussie, loonie and euro.

Against the euro, the dollar fell 0.39% to €0.8756.

"Investors think the European Central Bank is closer to pulling away the QE comfort blanket than previously thought," said Neil Wilson, senior market analyst at ETX Capital.

"As previously noted it's unlikely that the ECB will act quickly or aggressively (chief Mario Draghi did not sound hawkish, just more comfortable about downside risks) -- the market does seem to be overplaying this -- but it highlights just how much the market is paying attention to every utterance from the ECB the inflation data."

In stateside news, the final reading of US Q1 GDP growth printed at 1.4%, against views for a reading of 1.2%.

"The Federal Reserve are keen to keep tightening their monetary policy, and today’s report would suggest the US economy is gaining momentum," said Madden.

"Some traders are sceptical that the Fed aren't as hawkish as they are letting on, and Janet Yellen, the Fed chief, doesn’t want to rush into further interest rate hikes."