Carney gasps for air

So it seems that this week Governor Carney has been pushed into a corner. With UK data flying high for the majority of this week and the UK recovery appearing more balanced, it is no surprise that this week the GBPEUR rate finally breached €1.18. Yesterday the BoE kept rates on hold at 0.50% (no surprise there), and didn’t make any accompanying statement. This may have been a wise call considering the market took everything it wanted from Governor Carney’s speech last week. However, “no comment” has repercussions, and yesterday we witnessed this as UK 10yr debt spiked to a two year high, above the 3% mark. Disappointing industrial production data and the awful trade deficit figure has managed to provide a little justification for the BoE’s stance. If next week’s employment data shows improvement in labour figures, then the pressure on Carney may rise again. After all, the market can’t really expect perfect data. Time is ticking on the policy front and although current policy may be warranted, the market still doesn’t seem too convinced.

Sasha Nugent

Currency Analyst

Caxton FX