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What’s next? – GBPUSD 20.06.17

20 June 2017 08:52 PM BDT
What’s next? – GBPUSD 20.06.17

Sterling came under pressure on Tuesday morning as Bank of England (BoE) governor Mark Carney said it’s not yet the time to raise interest rates in the United Kingdom.

 

"From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment," said Carney earlier today.

 

Last week, the BoE took players by surprise when three members of the Monetary Policy Committee voted to hike rates by 25 basis points. Although five categorically opposed to the measure, there was a clearly hawkish influence among policymakers.

 

“Different members of the MPC will understandably have different views about the outlook and therefore on the potential timing of any bank rate increase,” Mr Carney stated during a breakfast meeting at the Manor House in the UK.

 

BoE Carney showed himself concerned about Brexit talks, which started yesterday amid strong political uncertainty after the ruling party lost a few seats and the Labour opposition strengthen.

 

"In the coming months, I would like to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and more generally, how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations," explained the BoE leader.

 

His comments didn’t take long to hit the pound. The British currency plunged to a one week low around 1.2670 against the dollar, falling around 0.45 percent.

 

The cable has been on the watch lately, with multiple terrorist attacks, parliamentary elections and Brexit talks continuously changing the political and economic scene. Now, the focus remains on the negotiation process with EU leadership to leave the bloc.

 

"Any development which prevented EU27 firms from continuing to clear trades in the UK would split liquidity between a less liquid onshore market for EU firms and a more liquid offshore market for everyone else."

 

In a parallel speech, UK Chancellor of the Exchequer Philip Hammond stated Britain is working on a Brexit deal that would be good for the people and warned about the removal of EU trading from London.

 

"Fragmentation of financial services would result in poorer quality, higher priced products for everyone concerned," Hammond explained.

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