• The Bank of England Governor Carney optimism about growth makes rate hike chances clearer
  • The Bank of England Governor Mark Carney said that data give him confidence that soft UK economy in the first quarter was largely due to weather, not the economic climate.
  • Carney says will have enough information to make a rate decision in August, even with new ONS data schedule.
  • Sterling rose following Carney’s speech reflecting increased chances of the MPC acting on rates as soon as on August 2, with the August Inflation Report.

The chances of the Bank of England moving forward with the rate hike in August increased after the Bank of England Governor Mark Carney sounded upbeat on the UK economy belittling the Brexit uncertainty concerns.

In terms of the UK economic outlook, Carney basically confirmed the message from the June meeting of the Monetary Policy Committee (MPC) saying “the incoming data have given me greater confidence that the softness of UK activity in the first quarter was largely due to the weather, not the economic climate.”

While speaking at the Northern Powerhouse Business Summit in Newcastle on Thursday, July 6, Carney also confirmed that the number of indicators of household spending and sentiment has bounced back strongly from what increasingly appears to have been an erratic weakness in the first-quarter., including strong UK labor market and there is widespread evidence that labor market slack is largely used up. In term of pay and inflation, Carney indicated that domestic cost growth continuously firmed in line with exp[ectations while the headline inflation is still expected to rise in the short term because of higher energy prices.

Carney confirmed the Bank of England MPC readiness to act on rates as soon as this August saying the policymakers will have enough information about the evolution of the UK economy even after the Office for National Statistics (ONS) rescheduled its macro data release calendar.

Although Carney made no direct policy changes hints in his speech, the market reaction was Sterling positive as the affirmative tone of Carney’s speech aligns with the Bank of England’s hawkish twist in June, when the number of voters favoring the rate hike increased to three policymakers with Bank of England chief economist Andy Haldane joining in the camp of external hawks Ian McCafferty and Michael Sauders to form 6-3 voting pattern.

Technically, the GBP/USD broke away from the downward sloping channel entering short-term uptrend above 1.3200. Technical oscillators like Momentum and the Relative Strength Index flattened in the neutral zone while Slow Stochastics made a bullish crossover also in the neutral zone. The GBP/USD should be supported by 1.3200 level and seen supported fundamentally by Carney’s policy view targeting 1.3280-1.3300 resistance zone on the upside.

GBP/USD 1-hour chart 


 

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD: A tough barrier remains around 0.6800

AUD/USD: A tough barrier remains around 0.6800

AUD/USD failed to maintain the earlier surpass of the 0.6800 barrier, eventually succumbing to the late rebound in the Greenback following the Fed’s decision to lower its interest rates by50 bps.

AUD/USD News
EUR/USD still targets the 2024 peaks around 1.1200

EUR/USD still targets the 2024 peaks around 1.1200

EUR/USD added to Tuesday’s losses after the post-FOMC rebound in the US Dollar prompted the pair to give away earlier gains to three-week highs in the 1.1185-1.1190 band.

EUR/USD News
Gold surrenders gains and drops to weekly lows near $2,550

Gold surrenders gains and drops to weekly lows near $2,550

Gold prices reverses the initial uptick to record highs around the $$2,600 per ounce troy, coming under renewed downside pressure and revisiting the $2,550 zone amidst the late recovery in the US Dollar.

Gold News
Australian Unemployment Rate expected to hold steady at 4.2% in August

Australian Unemployment Rate expected to hold steady at 4.2% in August

The Australian Bureau of Statistics will release the monthly employment report at 1:30 GMT on Thursday. The country is expected to have added 25K new positions in August, while the Unemployment Rate is foreseen to remain steady at 4.2%.

Read more
Ethereum could rally to $2,817 following Fed's 50 bps rate cut

Ethereum could rally to $2,817 following Fed's 50 bps rate cut

Ethereum (ETH) is trading above $2,330 on Wednesday as the market is recovering following the Federal Reserve's (Fed) decision to cut interest rates by 50 basis points. Meanwhile, Ethereum exchange-traded funds (ETF) recorded $15.1 million in outflows.

Read more
Moneta Markets review 2024: All you need to know

Moneta Markets review 2024: All you need to know

VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.

Read More

Majors

Cryptocurrencies

Signatures