Carney speech dents GBP

Yesterday saw BoE Governor, Mark Carney, speak before the Treasury Select Committee where he was seen to state that the currently low level of inflation is related to the depressed oil prices we’ve seen this year. This did contribute towards a drop for GBP to 1.4112 against EUR, and we even saw the BoE’s Chief Economist state that there might even be a cut in the interest rate because of weak inflation and global economic conditions. With GBP having made big gains against the commodity currencies at the start of the year, the pressure has been applied to low inflation levels – one knock-on effect being lowered exports. The close relationship with a struggling Europe has been an issue, too, in terms of weakened trade.

In Europe, Germany’s GDP came in as expected at 0.3%, which is coupled by the positive manufacturing and services data wesaw on Monday. IFO business climate data was also strong there, adding to positive sentiment and overall optimism, when it came in at 109 instead of the predicted 108.3. With there being renewed talk of furthering ECB quantitative easing, will Germany’s performance put the brakes on increased/prolonged QE?

In the States yesterday, we saw house prices improve and Q3 GDP figures revised from 1.5% to 2.1%, while personal consumption numbers were seen to drop and last month’s trade balance and exports declined. Consumer confidence was seen to drop-off as well for this month. Despite this mixed situation, it is still widely thought that the Fed will raise interest rates next month. Overall, the dollar looked good against the pound as it hit 1.5052 yesterday.

In terms of data today, we’ll see durable goods orders for last month, along with initial jobless claims and both Markit services PMI and PMI composite readings.