Pound surges to a post-Brexit high

Bloomberg

The pound climbed to the highest level against the dollar since just after Brexit vote and UK government bonds tumbled.
Sterling surged past $1.36 after Vlieghe, considered a dovish voter, turned hawkish to tell a conference that the moment was approaching for a rate hike. The premium to hold call options on the pound relative to puts rose to the widest since 2009, as markets moved to price two rate
increases next year.
The pound is world’s best-performing major currency this month as the central bank’s comments suggest it’s willing to look past sluggish wage growth to remove the monetary stimulus put in place after last year’s Brexit vote. Its performance contrasts with a slide caused by a Europe-linked crisis 25 years ago on Sept. 16, 1992, when Britain tumbled out of the Exchange-Rate Mechanism on a day known as “Black Wednesday.”
Sterling rose 1.5% to $1.3597 in London, having reached $1.3616, its highest level since June 24, 2016, the day after the Brexit vote. The pound strengthened for a sixth day versus the euro, gaining as much as 1.4% to 87.74 pence.
Money markets are now pricing a more than 75 percent chance of a rate increase in November, with a 25-basis-point rise fully priced for February and a second one by December 2018. Some currency analysts said two hikes might be a step too far given the uncertainty over Brexit and the economic outlook.
“I appreciate that the MPC has made it clear that they want to reverse the August 2016 cut and that one rate hike is a distinct possibility, but I am skeptical given growth is not that strong that the MPC will be rushing into a second hike — look how long it took the Fed to hike twice,” said Societe Generale SA strategist Jason Simpson.