Seeking Alpha

Hawkish remarks from Carney send pound surging

  • In his first big public appearance since becoming Bank of England governor, Mark Carney is a bit more hawkish than some may have hoped for, saying he sees signs the economic recovery is broad-based and set to continue, and the bank won't hesitate to hike rates when required.
  • On the dovish side, he says the bank won't consider hiking rates until 7% unemployment is hit and even that level isn't necessarily a trigger. There's also nothing about the bank's forward guidance which would prevent adding to stimulus if the bank deemed it necessary.
  • Cable (FXB, GBB) shoots higher, continuing a big run which began when Carney took the BOE helm earlier this summer. It's erased nearly all of a sizable early loss this session, and is buying $1.5530 vs. about $1.49 when Carney took over.
  • Bulls on the pound should remember that Ben Bernanke took over the Fed flashing his hawkish guns as well - hiking rates numerous times into clear signs the economy/housing was rolling over. Central bankers take it as sort of a code to start off tough on monetary policy.
  • The FTSE 100 (EWU) loses a bit more ground on the session, -0.6%.
  • Other U.K. equity ETFs: FKU, EWUS, DXPS.
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Comments (3)
  • youngman442002
    , contributor
    Comments (5129) | Send Message
    Sounds like a bernanke the word
    28 Aug 2013, 09:07 AM Reply Like
  • flemsnopes
    , contributor
    Comments (123) | Send Message
    Deja Bernanku
    28 Aug 2013, 09:15 AM Reply Like
  • UnemployedEconomist
    , contributor
    Comments (2) | Send Message
    No wonder the markets aren't taking him seriously - on one hand he says he will not hesitate to increase rates if the economy takes off yet he will only raise rates when we hit 7% unemployement target. It is is likely they will never acheive this rate given that bulk of unnempleoyment is based on micro reasons (people unwilling to work, relience on benefits) as opposed to macro reasons.
    28 Aug 2013, 09:35 AM Reply Like
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