BoE Governor Mark Carney Talks of ‘Gradual and Limited’ Rate Rises
Demand for the Pound cooled slightly yesterday following two days of sturdy gains as Bank of England (BoE) Governor Mark Carney said that ‘any prospective increases in the bank rate would be expected to be at a gradual pace and to a limited extent’.
Despite the mild selloff following Carney’s comments Sterling remains significantly stronger than it was prior to the BoE’s policy statement last Thursday.
In addition to the ‘gradual and limited’ rate rise statement, the BoE Governor noted that a sharp pullback in migrant workers coming to Britain as a consequence of Brexit was likely to drive wages higher and cause a short-term spike in inflation. However, Carney argued that this dynamic would only have a ‘modest impact on prices’ in the longer-term.
Pound to Euro Exchange Rate Softens on Carney Comments
The Pound to Euro exchange rate slid by over half a cent yesterday, falling from a two-month high as UK rate hike euphoria was dampened by sober comments from the BoE Governor.
An acceleration in Eurozone consumer prices, from 1.3% to 1.5%, appeared to bolster the appeal of the single currency during the morning and GBP/EUR continued to drift lower during the evening following Mark Carney’s speech. This still leaves Sterling around three cents stronger than it was at the beginning of last week’s session.
Pound to US Dollar Exchange Rate Falls Back from 14-Month High
‘Cable’ shed around -100 pips yesterday as Sterling suffered from a bout of profit-taking after striking a 14-month high on Friday. Demand for GBP/USD was also hit by BoE Governor Mark Carney’s comments on the likelihood that any UK rate hikes will remain gradual and limited.
Although markets don’t expect the Federal Reserve to raise rates again in 2017, some analysts predict that the US central bank will leave the door open to a December hike when it releases its latest projections on Wednesday evening.
This would likely give the ‘Greenback’ a positive boost, whereas a change in the forecasts to reflect a smaller chance of additional tightening this year could spur ‘Cable’ to fresh highs.
Pound to Canadian Dollar Exchange Rate Close to Highest in 50 Days
The Pound to Canadian Dollar exchange rate increased in value by around a third of a cent yesterday to hit its highest level in almost 50 days.
The catalyst for the latest GBP/CAD rally was a speech from Bank of Canada (BoC) deputy governor Timothy Lane, which saw the central banker highlight the importance of free trade. Traders had hoped that the BoC official would use the speech to suggest when interest rates might next rise in Canada, but were left disappointed.
Pound to Australian Dollar Exchange Rate Softens Slightly
The Pound lost a little bit of ground to the Australian Dollar yesterday, tumbling by around a third of a cent in the afternoon following BoE Governor Mark Carney’s remarks on interest rates. Although Carney clearly indicated that UK rates were likely to rise in the coming months, the Governor opted to stop markets getting too carried away by stating that any tightening would be gradual and limited.
Pound to New Zealand Dollar Exchange Rate Hits New 4-Month High
The Pound to New Zealand Dollar exchange rate also suffered minor losses yesterday afternoon following Carney’s comments.
GBP/NZD trading patterns are likely to be influenced by the latest New Zealand dairy auction; if the price of New Zealand’s most-lucrative export rises then the ‘Kiwi’ could rally, while a slump in dairy prices could impact demand for the high-risk New Zealand Dollar.
Data Released Today
EUR German ZEW Survey (Economic Sentiment) (SEP)
NZD Dairy Auction Whole Milk Powder MT (SEP 19)