Pound surge on Bank of England shift is a mixed blessing

The latest policy decisions will be announced on Wednesday evening and, although no changes are expected to interest rates or the balance sheet this time around, there is a belief that the Fed could signal a more hawkish outlook on policy.

Sterling recorded its best day against the dollar since April as the British central bank warned that it might hike interest rates in a first in more than a decade during the next months, on Thursday.

The pound climbed about 3 percent last week to $1.3594 on Friday. Against the euro, sterling rose 1.2 percent on Friday.

HSBC now sees GBP/USD ending the year at $1.35 – 15 cents higher than earlier projections – and avoiding parity with the euro. The kiwi traded at 72.80 U.S. cents from 72.88 cents in NY. Resales of Canadian homes rose 1.3 percent in August from July, breaking a string of four straight monthly declines, as Toronto sales bounced back after dramatic cooling during the spring market, separate data from the Canadian Real Estate Association showed. While some negativity is slowly priced out of the greenback, most investors still treat rallies as opportunities to fade, said the traders, who asked not to be identified as they weren’t authorized to speak publicly.

European bourses went much the same way, with the DAX down 0.17% to 12,518.81, the CAC 40 0.22% lower to 5,213.91 and the IBEX 35 0.42% in the red to 10,317.40.

Analysts at Barclays said they now expected the BoE to raise borrowing costs in November – but not necessarily because of the data.

North Korea fired another missile over Japan this morning, spurring a renewed wave of concerns about geopolitical tensions over North Asia and the States.

The shift by Mr Vlieghe has electrified markets since he has long argued that the dangers of raising rates too soon outweigh the risks of waiting too long.

The yield on two-year Treasury notes was up 1.6 basis points at 1.384 percent.

On the other hand, the economic damage brought by Hurricanes Harvey and Irma will likely become a drag on interest rate hikes.

Petrofac closed 1.18% lower despite RBC Capital Markets upping its stance on the oilfield services provider to “sector perform” from “underperform”, but Carnival slumped as it was hit by a downgrade to “neutral” from Credit Suisse, which removed the stock from its “focus list”.

Weekly gain: For the week, the Stoxx 600 scored a 1.4% advance.

Brent oil prices held near five-month highs on Friday, and were on track for the biggest weekly gain since late July, on forecasts for rising demand and the gradual restart of US oil refineries. WTI crude edged up to $49.91 per barrel while Brent jumped to $55.74.

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