Yesterday, Bank of England (BoE) Chief Mark Carney provided a comprehensive update for the markets as the first monetary policy statement and quarterly Inflation Report of the year were released. Sterling sold off in anticipation of the news, which warned of recession risks in the event of a no-deal Brexit and saw the prospect of a rate hike this year diminish slightly. However, concerns that inflation would persist above target, plus an ongoing belief in the market that a Brexit solution can be found, proved sufficient to eclipse pre-statement losses. Interest rate hikes may remain thin on the ground in the years ahead, but that in turn means the impact of each anticipated move on the Pound could be more significant.
Despite reports of progress being made, Donald Trump won’t meet the Chinese President before the deadline for increasing tariffs next month. The reason is preparation for the next summit with North Korea, and no clarity has been forthcoming as to whether the tariff deadline will be pushed back to account for this. Any indication that the US Treasury won’t yield could see risk sentiment diminished, something which would likely keep pushing the US Dollar higher.
The Pound swung by more than a cent around the Bank of England release yesterday, before settling back close to levels seen earlier in the week. Brexit clarity remains key to further progress here.
The Euro continues to work its way lower against the US Dollar, with the pair now having fallen every day this week. Yesterday’s downbeat Eurozone growth forecasts were the latest fundamental factor to take a toll on the pair.
The Pound held, and even gained some ground, against the Euro as the market digested Mark Carney’s words yesterday. With Brexit progress set to play a significant role in the outlook for Sterling, developments in the rhetoric between London and Brussels will be instrumental in where the cross goes next.