Investing.com - The pound was trading close to session highs against the dollar on Monday, boosted by expectations that the Bank of England will raise interest rates sooner than previously thought.
GBP/USD was up 0.55% to 1.6587, recovering from Friday’s lows of 1.6477.
Cable is likely to find support at 1.6300 and resistance at 1.6667, Friday’s high and a 28-month high.
Demand for sterling continued to be underpinned after data last week showed that the U.K. unemployment rate fell to 7.1% in November, to stand just above the 7% level the BoE has said is its threshold for considering raising interest rates from their current record low of 0.5%.
On Friday, BoE Governor Mark Carney said it was time for the central bank to “evolve” its forward guidance on rates, because the unemployment rate has fallen far more quickly than the bank anticipated.
Carney said that even with falling unemployment, the U.K.'s economic recovery had yet to reach "escape velocity", adding that exceptional monetary policy is still relevant.
Market sentiment improved as emerging market currencies stabilized after Turkey’s central bank said it would hold an extraordinary policy meeting on Tuesday to discuss measure to ensure price stability. The announcement came after the lira hit the latest in a series of record lows against the dollar on Monday.
Emerging market currencies have been hard hit since the Fed began scaling back its asset purchase program, while worries over political instability and the outlook for growth for some countries also weighed.
Investors were looking ahead to the outcome of the Fed’s monthly meeting on Wednesday, amid expectations for a reduction in its bond buying program to USD65 billion from the current USD75 billion.
Elsewhere, the euro fell to session lows against sterling, with EUR/GBP down 0.64% to 0.8246 from 0.8297 on Friday.
The common currency shrugged off a report showing that German business confidence rose to the highest level in two-and-a-half years in January.
The German research institute Ifo said its business climate index rose to 110.6 this month, above forecasts for a reading of 110.0 and up from 109.5 in December, indicating that businesses in the euro zone’s largest economy had a strong start to the year.