The Bank of England Governor, Mark Carney sunk the Pound yesterday afternoon as he said the BoE will probably have to loosen the monetary policy within months to deal with the shock Brexit vote. Carney went on to say that the central bank will not hesitate to act when it comes to safeguarding the economy or the resilience of the financial system. Carney said “the economic outlook has deteriorated and some monetary policy easing is likely to be needed over the summer.” Sterling depreciated substantially after the BoE Governor’s comments.
High levels of volatility continued yesterday as the race to be the next UK Prime Minister took shape. The Pound strengthened yesterday morning after front runner Boris Johnson unexpectedly ruled himself out of the race to be the next Conservative party leader. The news has led markets to believe the transition to replace David Cameron will now be a lot smoother. The two ministers that lead the pack now include former Brexit ally Michael Gove and Home Secretary Theresa May.
Yesterday’s economic calendar was jam packed. Firstly, the UK released its final reading of Q1 GDP, which was forecast at 0.4%. The reading met economists’ forecasts at 0.4%, a slight decline from March’s 0.6%. Across the pond, the US released its weekly jobless claims figure and Chicago PMI figure. Both readings exceeded expectations, notably Chicago PMI, which posted its best reading since January 2015. The bullish US data helped support the Greenback yesterday afternoon.
Manufacturing data dominates today’s calendar. There will be data releases from the UK, US and manufacturing hub China. Economists are expecting a drop in Chinese Manufacturing PMI this month. The figure for growth, excluding transportation is due to halve to 0.2% and the figure including transportation is expected to contract by 0.8%, compared with 3.4% growth in April. US ISM Manufacturing PMI is released this afternoon. The reading is forecast to continue in expansion at 51.5. Whilst UK Manufacturing is forecast to register at 50.2. Anything above 50 indicates expansion and below contraction.