Carney looks to cut through trade myths
Thursday 27 June, 2019
Daily Currency UpdateGBP - British PoundIn another quiet day for UK markets yesterday where the pound traded in a narrow range against its peers (0.3% against the USD) the testimony of Mark Carney in front of the Treasury Select Committee might have been the highlight. Carney highlighted the obvious stating that the uncertainty around a no deal Brexit is hurting business investment and short term economic growth. Interestingly the Governor of the Bank of England was also drawn on his thoughts GATT 24, the latest buzz trade term that's doing the rounds of Whitehall. GATT 24 is an obscure rule that allows free trade for up to 10 years whilst a permanent trade deal is being negotiated, something that Boris Johnson has suggested could work. However, like a lot of Brexit issues this can be argued either way and Carney was firmly on the side that this wouldn't work.Most significantly for the pound moving forward Carney underlined once again that in a case of a no-deal Brexit the bank would be more likely to provide stimulus to the economy rather than raising interest rates to protect the currency and protect against inflation.
Key MoversWith the G20 summit in Japan set to start tomorrow, investors took solace in comments from US Treasury Secretary Steven Mnuchin yesterday when he said that a US-China trade deal is 90% complete. Whilst we have heard this rhetoric before from both sides, investors still see this as a cue and the USD rallied with USD/JPY picking up ground. There was a general increase in appetite for risk yesterday and on the currency markets this saw the New Zealand dollar benefit the most. Despite the fresh dovish rhetoric from the RBNZ the Kiwi is still surging. Indeed NZD/JPY which is an indicator of risk appetite is at 3 week highs.
- GBP/USD: 1.2570 - 1.2710 ▲
- GBP/EUR: 1.1140 - 1.1210 ▲
- GBP/AUD: 1.8120 - 1.8170 ▲
- GBP/NZD: 1.8960 - 1.9020 ▼
- GBP/CAD: 1.6650 - 1.6720 ▼