The pound has risen back against its most major opponents after the Bank of England Governor Mark Carney said that the central bank is getting closer to begin raising interest rates, as the economy has largely normalised.
"With many of the conditions for the economy to normalise now met, the point at which interest rates also begin to normalise is getting closer," Carney said in a speech at the Institute and Faculty of Actuaries General Insurance Conference, Wales.
"In recent months the judgement about precisely when to raise Bank Rate has become more balanced."
The exact timing of the first rise in the BOE's benchmark rate will depend on the performance of the UK economy. "The precise timing of the first rate rise is less important than our expectation that, when rates do begin to rise, those increases are likely to be gradual and limited," Carney added.
Meanwhile, Bank of England Deputy Governor Minouche Shafik was reported to have said that the eurozone presents a 'significant risk' to the UK economy.
She said monetary policy alone cannot do all the heavy lifting, so more growth-oriented fiscal policy and structural reforms are needed to make big economies particularly in Europe more competitive. The pound recovered to 1.6341 against the dollar, from early one-week low of 1.6275. On the upside, 1.64 is seen as the pound's next possible resistance level.
The Labour Department released a report that showed a modest rebound in initial jobless claims in the week ended September 20. The report said initial jobless claims climbed to 293,000, an increase of 12,000 from the previous week's revised level of 281,000.
The pound extended rally to more than a 2-year high of 0.7784 versus the euro, compared to an early low of 0.7829. At Wednesday's close, the pair was worth 0.7820. The pound is likely to challenge resistance around the 0.77 zone. Euro area economy is likely to expand in the second half of this year even though the recovery seems to have lost momentum recently, and the central bank European Central Bank President Mario Draghi said.
In an interview to the Lithuanian business daily Verslo Zinios, "We expect modest growth in the second half of the year and continue to expect euro area domestic demand to be supported by various factors."
