GBP Slides on Carney Comments

Sterling fell overnight on cautious Carney comments. Central bank speakers and Canadian data are in focus today.

Previous Day's Market Highlights

The pound was sold off overnight after BoE Governor Carney’s comments in an interview with the BBC weighed on investors’ expectations of a May rate hike. Carney said that a hike this year is “likely”, that there are other meetings, and that the Bank will continue to watch Brexit negotiations and “mixed data” (like yesterday’s disappointing Retail Sales print). Data out earlier in the week had showed inflation slowed more than expected in March, prompting some investors to speculate that the BoE might hold off on raising rates next month, and Carney’s cautious comments add fuel to that speculative fire. The BoE announces its next decision on 10 May.
 
While the pound had started recovering post Retail Sales losses during the afternoon session, it gave up those gains overnight. Sterling-dollar dropped below 1.41 to its lowest levels since 6 April, and sterling-euro fell to 1.14, its lowest since 1 April. This marks a drop of nearly 2% against the euro and over 2% against the dollar since Tuesday’s highs.
 
The dollar gained in the afternoon session, which saw euro-dollar fall towards 1.2330 from an earlier test of the 1.24 level—all familiar territory. Against the commodity currencies, sterling also lost ground, falling back towards 1.78 against the Canadian dollar, some of the rate’s lowest levels since mid-March, although it pared some losses against the Australian and New Zealand dollars.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1394 1.1600 1.1363 2.04%
GBP/USD 1.4064 1.4374 1.3965 2.85%
EUR/USD 1.2342 1.2477 1.2218 2.08%
GBP/AUD 1.8234 1.8509 1.8176 1.80%
GBP/NZD 1.9426 1.9644 1.9171 2.41%
GBP/CAD 1.7815 1.8382 1.7815 3.08%

Today's Market Highlights

The week draws to a close with a quieter macroeconomic calendar. Following Carney’s comments last night, greater attention will be placed on MPC Member Saunders’ speech this morning at the University of Strathclyde’s Fraser of Allander Institute (10:30 BST). Saunders was one of two MPC members to dissent in favour of hiking rates at the March meeting, and investors will watch for any clues as to his expectations for interest rates as they continue to digest Carney’s comments.
 
In the afternoon, the Canadian dollar is back in focus after the BoC kept interest rates on hold on Wednesday. Mixed Retail Sales and CPI data may keep the loonie under relative pressure (13:30).
 
The final Fed speakers of the week include Evans, who will speak at the Graaskamp Center Spring Board Conference, and Williams, who will speak at the Fisher Center for Real Estate and Urban Economics.
 
Looking ahead to next week, items of note include the latest Australian CPI data, monetary policy decisions from the ECB and Bank of Japan, and preliminary estimates of Q1 GDP in both the US and the UK.

Today's Economic Calendar

Time Currency Release Consensus Previous
10:30 GBP MPC Member Saunders Speaks
13:30 CAD Retail Sales MoM (Feb) 0.3% 0.3%
13:30 CAD Core Retail Sales MoM (Feb) 0.3% 0.9%
13:30 CAD CPI YoY (Mar) 2.4% 2.2%
13:30 CAD BoC Core CPI YoY (Mar) 1.5% 1.5%
14:40 USD Fed's Evans Speaks
15:00 EUR Preliminary Consumer Confidence (Apr) -0.2 0.1
16:15 USD Fed's Williams Speaks

Caxton