Sterling Continues Gains

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 |  Includes: FXB, GBB
by: FXstreet

FXstreet.com (London) - The Office of National Statistics yesterday confirmed estimates that its estimate of 0.7 percent second quarter growth, with an upwards revision of its first quarter estimates from 0.3 to 0.4 percent. There was some bad news in the data, with a wider than expected current account deficit.

Since July 10, the pound has climbed steadily from USD1.4861 to USD1.6074.

It's a long way from earlier in the year, where Prime Minister David Cameron faced questions from opposition MPs on sterling weakness.

Carney confidence

In an interview with the Yorkshire Post, published today, Bank of England Governor Mark Carney said: "Within the UK, we are probably leading the pack of the major advanced economies as we speak right now. But of course we had the deepest recession so we are coming back from that."

Should the UK economy falter, Carney has said that he would be prepared to ramp up QE, but said in the interview that: "my personal view is, given the recovery has strengthened and broadened, I don't see a case for quantitative easing and I have not supported it."

The comments triggered a jump on sterling to USD1.6135.

With forward guidance and communication the trend among the world's central banks, the difference between policymakers at the Bank of England and the Fed couldn't be more stark. Despite efforts made by the Fed to clarify communication with the markets, the "will they, won't they?" speculation surrounding the last FOMC meeting was an utter communication breakdown. It has then been followed up with hints from St. Louis Fed president and FOMC voting member James Bullard that a small tapering could be possible in October. Or maybe it won't.

On the other side of the fence, Bank of England governor Mark Carney has been clear in his communication with the markets. He has clearly set out his policy objectives, and the conditions under which those objectives will be met and when the Bank of England would consider hiking its record-low rates and scaling back its GBP375bn quantitative easing program.

Sterling may begin to run out of steam as macro data ceases to surprise to the upside and growth becomes the new norm, but Carney will certainly help to support confidence in the pound, and avoid the central bank speculation-induced volatility that has hit the dollar.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.