The GBP/USD managed to shrug off the hawkish comments from Fed Chair Janet Yellen, finishing higher for the week.
The British Pound received a boost early in the week with most of the support and buying interest coming after hawkish comments from various Committee members. Earlier in the week, comments from Bank of England Governor Mark Carney and MPC member David Miles helped trigger a strong price surge.
Carney said the could raise rates sooner than expected. The normally dovish Miles surprised investors by saying it’s time to start taking rates back to more normal levels because waiting too long could mean sharper increases later. He also added that investors shouldn’t be looking at other central banks’ moves for clues as to how BoE policymakers will act.
During two days of testimony before Congress, Yellen signaled that the remains on track for the first rate hike in almost a decade.
“If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target, thereby beginning to normalize the stance of ,” she said.
Bank of England Governor Mark Carney ended the week by hinting that record low interest rates are set to rise from the 0.5 percent they have been stuck at since March 2009 . This likely means mortgage rates have hit the bottom. In a speech, Carney said that households should prepare for rates to rise at “around the turn of this year”.
This news likely means that record low mortgage rates could start to disappear from the market. Those with standard variable rate or tracker mortgages could see monthly costs go up. It’s a little too early to tell, but this could have a major impact on housing if these homeowners can’t come up with the money to make their new higher mortgage payments. Stick that one in your pocket and take it out when rates actually begin to rise. Higher rates may kill the U.K. housing market rally.