Short Sterling futures have priced in a 25 basis point hike in British interest rates before year-end following Mark Carney's suggestion yesterday that a rate boost could come sooner than markets expect. The market has also priced in 25 basis point boosts for each quarter of 2015.
Looking at U.S. rates, the long-end of the Treasury curve didn't react to Carney's unexpected hawkishness, but the short end is a different story, with the 3-year Treasury yield up 5.5 basis points to 0.952%, the highest since May 2011. Looking at Eurodollar futures, the timing of the Fed's first hike was nudged forward a bit to about April of next year.
The pound (FXB) continues to gain, +0.3% today to $1.6954. In their first reaction to Carney's speech, equity investors sell, with the FTSE 100 -1.1%.
Previously: Sterling spikes on hawkish Carney comments