Azernews.Az

By Bloomberg

Volatility in the pound rose to its highest level in almost a month versus the dollar before Bank of England Governor Mark Carney’s speech later on Wednesday.

A measure of price swings in sterling-dollar expected in the coming week climbed as a report released by the Office of National Statistics showed industrial output beat analyst estimates, even as factory output unexpectedly contracted. Sterling has struggled to gain versus peers as markets find it increasingly challenging to predict when the BOE’s Monetary Policy Committee would be prepared to tighten monetary policy. Traders will focus on Carney’s speech for hints.

“Today’s Mansion House speech could attract considerable attention with investors keen to hear from the governor about the (changing) BOE policy outlook,” London-based analysts including Valentin Marinov, at Credit Agricole SA’s corporate and investment-banking unit, wrote in a note to clients. “We suspect that risks are tilted towards a more dovish message consistent with MPC’s gloomier economic assessment of late.”

The pound appreciated 0.7 percent to 72.86 pence per euro at 1 p.m. London time. It touched 73.89 pence on Tuesday, its weakest level since May 8. Sterling rose 0.7 percent to $1.5487. One-week volatility for the pound versus the dollar advanced to 9.74 percent and touched 9.82 percent, the most since May 11.

The Mansion House dinner is an annual event that traditionally captures the attention of traders and investors because it’s addressed by Bank of England governor and Chancellor of the Exchequer, or the finance minister, and attended by leading bankers.

Mansion House History

At the Mansion House dinner last year, Carney told households and businesses to prepare for a rate increase “sooner than markets currently expect,” prompting investors to shift bets on a move to February 2015 from May.

In reports Wednesday, industrial production for April rose 0.4 percent from the previous month, and climbed 1.2 percent from a year earlier, beating analyst estimates of 0.1 percent and 0.6 percent respectively. Manufacturing data fell short of forecasts.

Benchmark 10-year government bond yields rose four basis points, or 0.04 percentage point, to 2.14 percent. The 5 percent gilt due in March 2025 fell 0.435, or 4.35 pounds per 1,000- pound face amount, to 125.01.