Sterling was under the microscope yesterday as Bank of England (BoE) Governor Carney testified on the economic consequences of the Brexit Vote before the House of Lords Economic Affairs Committee. However, sterling traded lower even before Carney took the stand as risk aversion came into play. Carney stated that monetary policy has, in many respects, been overburdened. He also welcomes that the government is signalling resetting of the balance of monetary, fiscal and structural policy. He went on to say that the BoE will not change how it conducts monetary policy unless Parliament changes its remit.
In other news that could affect the UK for years to come, the government has approved a third runway at Heathrow to expand UK airport capacity. The UK’s Department for Transport forecasts that the runway will create up to £61 billion ($75 billion) in economic benefits over the next six decades as it estimates that the new runway should nearly double its capacity to 138 million passengers by 2050.
Another day, another story on inflation, this time from the toy model sector. Leading manufacturer Hornby told retailers that wholesale prices for many of its trains would rise by an average of 10%. Hornby’s exposure is in US dollars, largely due to manufacturing abroad, so sterling’s 17% devaluation against the US currency since the Brexit means that UK prices must inevitably rise.
The day ahead is fairly quiet in terms of significant data releases, with just the mortgage approvals number due.