Pound Gulf Widens as Traders Reject Economist Doubts: Currencies

Warnings by economists that the U.K. recovery is too fragile for the Bank of England to curb monetary stimulus are going unheeded in the foreign-exchange market, where no currency can match the pound’s gains since March.

Sterling is at its strongest since 2010 against a basket of the dollar, euro, yen and six other top currencies based on Bloomberg Correlation-Weighted Indexes. The pound is up 8.8 percent versus the dollar since March 12, the most of 31 major developed- and emerging-market currencies tracked by Bloomberg.

While traders are betting on the BOE being the first major central bank to tighten policy as unemployment falls and inflation holds above targeted levels, 71 percent of economists in a Bloomberg survey published Nov. 20 said the recovery has yet to achieve “escape velocity.” That’s a term BOE Governor Mark Carney has used to describe conditions that will allow him to raise interest rates from a record low.

(Source: Bloomberg)