A slightly more hawkish tone from Bank of England (BOE) Governor Mark Carney on Wednesday has prompted the U.K. currency to move back above the psychologically critical $1.30 mark in Thursday's session.
The inconsistent public messaging from a line-up of the central bank's policymakers since its last meeting in early June has caused U.K. assets to jump around in the past two weeks as an initial dovish bent from Governor Carney was offset by hawkish noises from retiring Monetary Policy Committee (MPC) member Kristin Forbes and the bank's Chief Economist, Andy Haldane.
It was, however, an apparent ramp-up in hawkish rhetoric from Governor Carney speaking again, this time at the European Central Bank (ECB) Forum in Sintra, Portugal on Wednesday that has caused U.K. markets to assign a greater probability to the possibility of a rise in interest rates this calendar year.
"As spare capacity erodes, the trade-off that the MPC must balance lessens, and, all else equal, its tolerance for above-target inflation falls," said Carney in comments swiftly jumped upon by traders.
"Some removal of monetary stimulus is likely to become necessary if the trade-off facing the MPC continues to lessen and the policy decision accordingly becomes more conventional," he added.