UK under scrutiny as pound collapses

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 20, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Guatemala) - ANZ Analysts at ANZ explained the key events that fell in for the UK overnight.

    Key Quotes:

    "A speech from BoE Governor Carney was very much in line with last week's MPC minutes. The slowing in wages growth (from levels not seen to be sufficient to justify higher rates, according to many MPC members) and weakness in domestic inflation, combined with downside risks to the outlook, mean that "now is not yet the time to raise interest rates." This soft tone from the BoE, along with Brexit concerns, the fall in oil prices and uptick in financial market volatility since the start of the year, has seen market economists, as well as interest rate markets, push back expectations of a BoE rate rise to the end of the year. Carney said he's monitoring cumulative progress in three key indicators for signs that tightening should begin: core inflation, domestic cost pressures and the prospects for growth momentum.

     Earlier, slightly stronger than expected UK inflation data were released for December, with headline CPI up 0.1% m/m and 0.2% y/y and core CPI 0.2ppts higher than expected (and Nov) at 1.4% y/y. These data didn't make much difference to markets – BoE communication continued to be dovish, with MPC members emphasizing the need for wages growth to be stronger before they are willing to raise rates. Overnight, new external MPC member Vlieghe said that he wasn't convinced the recovery was strong enough yet to begin raising rates. Longer-term he also thought that the aging population, higher levels of debt and income inequality would be factors keeping rates lower than they would be otherwise."
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