Currency Note Sterling

Carney undermines Sterling (again)

By Smart Currency August 14th, 2014

The ability of a Chairperson of a central bank to undermine their own currency when it’s on the up should not be underestimated and when Carney spoke at 10.30am yesterday sterling went into free-fall. It lost ground against all other major currencies, losing over a cent against the euro and one and half cents against the US dollar.

Concerns over the slow pace of wage rises in the UK intensified as the Average Earnings Index decreased to -0.2%. The fact that wages are not rising as quickly as prices has been a worry for the public and policymakers alike in recent weeks, and yesterday’s data lent weight to the argument that interest rate hikes should be held back until we see more parity. This, along with the Governor of the Bank of England’s continuing assertions that interest rate increases will be small and gradual and unlikely to be any time very soon was the catalyst for the markets to sell sterling. The UK unemployment rate came out as expected at 6.4% – the lowest rate since February 2009 – however, this did little to halt sterling’s depreciation. By comparison, there is little of note occurring today that could affect sterling, but further rate movements are not unlikely as investors continue to react to yesterday’s events and look towards Friday’s second UK growth estimate.