Expectation of extended term for BoE governor benefits pound
[vc_row][vc_column][vc_column_text]The pound got a strong boost against its rivals when Bank of England (BoE) Governor Mark Carney confirmed that talks were ongoing with the Treasury regarding an extension of his term.
Meanwhile some better-than-expected US growth data encouraged the US dollar to extend its bullish run as the impact of Trump’s trade policies remains to be seen.
Surprise downward revisions to August’s Eurozone manufacturing and services PMIs dampened the appeal of the euro, especially as the German economy showed fresh signs of softness.
With the US-China trade spat continuing to escalate in response to US changes to trade policy demand for the Australian and New Zealand dollars also proved generally limited.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
BoE speculation boosts pound
Speculation that BoE Governor Carney could remain in his post past his original June 2019 departure date saw GBP exchange rates rally sharply last week.
Traders were encouraged by the prospect of greater continuity in the months that follow the UK’s departure from the EU, especially in the face of persistent Brexit-based uncertainty.
Even though EU chief negotiator Michel Barnier continued to offer relatively positive comments, noting that ‘the no-deal scenario is not our scenario’, key issues such as the Irish border question remain.
The unbalanced nature of August’s UK PMIs put some pressure on the pound, meanwhile, as growth in the manufacturing and construction sectors eases.
While July’s 3-month average gross domestic product reading pointed towards a growth rate of 0.6% this was not enough to ease concerns over the economic outlook, with much of this acceleration in growth attributable to the summer heatwave and the World Cup.
Pound exchange rates look vulnerable this week as investors brace for the BoE’s September policy announcement, even though no change is forecast at this stage.
If policymakers show increased signs of caution GBP is likely to fall out of demand once again, with the case for tighter monetary policy unlikely to improve in the months ahead.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
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* Information courtesy of Currencies Direct, Philip McHugh
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information. This article was written by Currencies Direct.
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