Investing.com - The pound rose to its highest level in five years against the dollar on Monday, rising above the 1.70 level after Bank of England Governor Mark Carney warned last week that U.K. interest rates could rise sooner than expected.
GBP/USD hit 1.7011, the highest since August 6, 2009 before pulling back to 1.6978, 0.07% higher for the day.
Cable was likely to find support at 1.6950 and resistance at 1.7050.
Sterling continued to build on gains after Mark Carney said last Thursday that rapid economic growth and the steep decline in the jobless rate mean that the time to begin raising interest rates is growing closer.
"There's already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced. It could happen sooner than markets currently expect," the BoE governor said.
Official data on Wednesday showed that the U.K. unemployment rate fell to a five-year low of 6.6% in the three months to April.
Carney said the bank will monitor the labor market closely to determine the right moment to start raising rates and reiterated that when rates do start to rise they will do so only gradually.
The comments prompted investors to bring forward expectations for a rate hike by the BoE. Some market watchers already expect the central bank to start raising rates from their record low 0.5% late this year.
The pound’s gains were held in check as concerns over the ongoing Sunni insurgency in Iraq continued to weigh on market sentiment, fuelling fears over the impact of reduced oil supply on global growth.
Elsewhere, the pound rose to fresh one-a-half year highs against the euro on Monday, with EUR/GBP down 0.23% to 0.7963.
The euro has weakened broadly since the European Central Bank eased monetary policy earlier this month, in a bid to tackle persistently low levels on inflation in the euro area.
The euro zone was to release revised data on inflation later Monday. Preliminary data showed that the annual rate of euro zone inflation fell to 0.5% in May, well below the ECB’s target of close to but just under 2%. The consensus forecast was for the annual rate of inflation to remain unchanged at 0.5%.