Mark Carney fails to convince investors over his “forward guidance”
By Smart Currency August 29th, 2013
Sterling experienced mixed movements yesterday, suffering losses early in the day as investors speculated on what Mark Carney would say in his speech. Predictions leant towards him reiterating his forward guidance plans to keep interest rates at their record low and as such this weighed heavily on the currency. These predictions came true, and Mr Carney confirmed that the central bank had no intention of raising interest rates until they saw significant improvements to the UK’s economy. The Governor promised that even if unemployment fell below the 7% threshold, this was not an automatic trigger to raise interests rates as other factors needed to be considered; furthermore, he went as far as saying that if necessary the central bank could actually look to increase the current level of quantitative easing. In spite of this pledge, the Governor was unable to convince investors – many of whom are not expecting a rate hike in the next 12 months. On the back of this, the early losses were retraced somewhat, as investors reacted to Carney’s words. With no further significant data due from the country this week, further shifts in the exchange rate are likely to come mainly from developments in Syria and the continuing fallout and reaction from the Governor of the Bank of England’s speech. Call your trader now for the latest price on sterling.