'By backtracking his hawkish comments, Carney may have endangered BoE's credibility' - David de Ferranti, DailyFX

David
de Ferranti

PROFILE:
• Current Job:  Currency Analyst for DailyFX.com
• Career: Bachelor of Economics degree from the University of Sydney, with majors in Finance and Economics.

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David de Ferranti is a currency analyst for DailyFX.com and actively trades a range of markets including FX, CFDs, commodities and equities. His trading approach marries a macroeconomic view of the market for direction with technical analysis to time entries and manage risk. His research and commentary is regularly cited in the financial media including on Bloomberg and in the Wall Street Journal. David holds a Bachelor of Economics from the University of Sydney with majors in Finance and Economics.

What do you think about BoE governor Carney's comments during his testimony before the Treasury Select Committee, suggesting that his previous hawkish remarks were a way of injecting volatility into markets? Is that a safe strategy?

Carney wants to see market expectations more accurately reflect the prospect of interest rate normalization to avoid a sudden spike in volatility down the track. Shaping expectations is an important part of policy, yet is a delicate game for any central banker. By backtracking on his hawkish comments earlier in the month Carney may have endangered the bank’s credibility which could impede their efforts to steer the market going forward.

Do you expect any further action from the ECB next week? There are some talks that say the ECB will be forced into QE in three months. What do you think?

The ECB has already taken a considerable step by implementing new non-standard monetary policy measures earlier this month. While the central bank waits to assess impact of their action on inflation and the broader economy, it is unlikely to add anything further to the policy mix.

Do you see oil prices rising further on the developments in Iraq?

The Iraqi conflict has certainly added a premium to crude benchmarks based on fears of supply disruptions. Heightened uncertainty may continue to offer a source of short-term support to prices. However, the potential for crude to remain elevated on concerns alone could be limited given the turmoil has yet to affect production and other OPEC members have committed to boosting output to offset any declines from Iraq.

The EUR/USD remains glued to 1.3600 area despite upbeat US economic data and ECB recent steps, why?

EUR/USD’s resilience over the past week may reflect both a weaker greenback and the market having priced in the European Central Bank action in June. ECB officials had flagged the potential for action well-ahead of their meeting and speculation alone weakened the Euro in the lead-up to the event itself. Meanwhile the US Dollar has been left uninspired by Fed policy makers retaining a dovish posturing alongside a lackluster showing from economic data.