Contrary Carney sends GBP exchange rates to multi-week highs

An unexpected change in outlook from Bank of England (BoE) Governor Mark Carney saw the pound skip merrily higher against the majors on Wednesday.

GBP/EUR bounced from €1.1261 to a high of €1.1394, GBP/USD rallied to a three-week high of $1.2978, GBP/AUD spiked from AU$1.6848 to AU$1.7027 and GBP/NZD jumped to NZ$1.7782 from NZ$1.7603. The pound didn’t manage to hold gains against the Canadian dollar however, with GBP/CAD easing from a best rate of C$1.6967 to close the day at C$1.6896.

Will these GBP gains last? Keep scrolling to find out...

What’s been happening?

The Bank of England (BoE) has been one of the driving forces of pound movement over the past couple of weeks, and that trend continued yesterday.

On this occasion a surprising shift in tone from Governor Mark Carney sent GBP exchange rates soaring.

After stating just last week that the UK isn’t ready for higher borrowing costs, contrary Carney chose to use a speech at the European Central Bank (ECB) banking forum in Portugal to boost rate hike expectations.

Carney commented; ‘Some removal of monetary stimulus is likely to become necessary if the trade-off facing the MPC continues to lessen and the policy decision accordingly becomes more conventional.’

‘The extent to which the trade-off moves in that direction will depend on the extent to which weaker consumption growth is offset by other components of demand including business investment’.

His statement was enough to help Sterling rally to multi-week highs against the US dollar and Australian dollar, with the pound also jumping by around 0.7% against the euro.

However, with Bank of Canada (BOC) Governor Stephen Poloz also hinting at a near-term rate hike, the pound was unable to cling to its best levels against the Canadian dollar.

In political news, the government survived one of its first big tests – defeating a Labour amendment to scrap the public sector pay cap.

PM Theresa May’s minority government won the vote 323 – 309, but while this was one hurdle surmounted, there are plenty more on the horizon.

What's coming up?

There are a few economic releases on the calendar today with the potential to cause currency movement.

From the UK we’ve got net consumer credit and mortgage approvals numbers, neither report is liable to have too much impact on the pound unless it deviates substantially from forecasts.

Eurozone news could trigger EUR fluctuations however. If the German Consumer Price Index reveals a slowing in inflation, the euro could slide on depressed expectations of the ECB making near-term adjustments to stimulus.

Finally, US dollar volatility could follow the publication of US first quarter GDP data and initial/continuing jobless claims stats.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.