Sterling was on the backfoot yesterday following comments from Bank of England Governor Mark Carney who spoke at a key conference in London titled “The Future of Inflation Targeting’. His comments were unexpectedly dovish, raising doubts on the UK’s ability to recover from a lacklustre 2019 which saw all major sectors decline as a result of ongoing Brexit uncertainty. As expected, traders took this opportunity to sell the British Pound, with the currency the worst performer amongst its G10 peers on the day. He went on to reveal that the central bank’s Monetary Policy Committee is now mulling whether it needs to help via additional stimulus. Carney believes that there is capacity in the economy to restart quantitative easing with a package equating to £250Bn; in context compared to Aug 16 the BoE implemented QE of £60bn.
Today, the UK markets will also be keen to the hear BoE’s Tenreyro comments following the rhetoric from BoE Governor Carney yesterday.
US Iran Tensions Ease
Overnight and during yesterday’s trading session we saw tensions start to ease in the Middle East. Congress passed a bill designed to limit President Trump’s ability to undertake actions against Iran without Congressional approval. However, this is unlikely to pass in the Republican- controlled Senate.
Looking to the final session of the week, the market always focusses on the monthly US labour data; The labour data is broken down into 3 parts, job creation, earnings inflation and the headline rate. The FOMC use it as a key barometer of the economy and can impact their view on monetary policy. Earlier in the week the ADP employment report which can be used as a barometer to the government figures posted a much better than expected at 202k; today’s headline reading is 162k.