Dollar continues to strengthen against both the Euro and GBP.
The dollar strengthened against its higher yielding peers as a measure of currency market volatility reached its strongest level since February.
The greenback reached an almost six year high versus the yen on speculation US employment data tomorrow will back the case for the Federal Reserve to raise interest rates next year.
Again we see the Great British Pound taking a hammering on what is a very quiet day for data releases. Attention today will be focussed on the appearance of Bank of England Governor Carney before the Treasury Select Committee, along with MPC members David Miles, Nemat Shafique and Martin Weale. The meeting takes place at 14.45 today.
Martin Weale was one of two MPC members to vote for an increase in the policy rate at the August meeting. The hearing will provide will provide markets with the opportunity for a detailed discussion of the thinking behind the views of the policy positions on the Committee.
Bank of England governor Mark Carney continuously argues that there is no need to raise interest rates, central to his case is the mountain of debt financing property. Home loans account for almost 90 percent of the 1.45 trillion pounds owed by UK households. In London, where the average home costs 500,000 pounds, first time buyers are paying almost nine times their annual income to get onto the housing ladder.
Sterling continues to fall at a worryingly fast pace as a Scottish split would hit UK growth. GDP growth would be around 0.75 percentage points lower than its previous estimate in the event of a ‘Yes’ vote. Such a large fall in growth would make interest rate rises likely, have a marked negative impact on sterling and reduce gilt yields.
So what is next for the UK? The prospect of Scotland voting to leave the UK next week has injected huge uncertainty into the financial markets. Uncertainty is something that investors famously dislike. So there are fears that they will take their money out of Britain rather than face all the unanswered questions over the effect of Scottish independence on the economy and markets.
With mounting concerns about weakening prices and activity in the euro area, today’s French and Spanish industrial output figures for July will shed some light on the Q3 outlook.