Bank of England talks up the pound exchange rate
Though the FOMC decision has received the bulk of the global foreign exchange markets yesterday, but the UK was brimming with event risk and news of its own.
February’s labour data kicked off the day. The 34,600 filing drop in jobless claims was much larger than expected and the January ILO jobless rate held at 7.2 percent – a tad higher than the 7.0 percent target the Bank of England spelled out in its forward guidance statements.But this did very little to move the pound exchange rate as the news was supposedly factored in
This has increased the speculation of further rate rises which have been buoyed since BoE Governor Carney took the reins last summer, but it doesn’t move forward the timeline like the Fed did.
Than we we had the Bank of England minutes which were interesting to say the least.
The Bank of England noted that the recovery was not balanced (what does this mean?) and that inflation was curbed by the pounds recent strength as it has pushed down import prices and fuel costs (we all want a cheap TV).
These are the same concerns that the ECB noted at its last meeting, but the threat of a policy move due to the pound didn’t take.
The transcript also said explicitly that there was risk of further pound gains as the economy recovered. Which was a mixed message that suggested the Bank of England is unhappy with the stronger pound.
But what are they going to do Sell Pounds and Buy Euros ? i hope not as that will surely drive me to a early grave.