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All ears on Governors speech yesterday

All ears on Governors speech yesterday

The market was expecting a rather dovish speech from the new governor Mark Carney but got quite the opposite which led to a roller coaster of a day. He made it clear the British economy was in a mess and making headway was hard work but stayed away from any confirmation that rates were going to stay at 0.5% for the foreseeable. He said interest rates would stay as they are until we see unemployment come down to 7%. It was this comment that’s left the market rather unnerved.

So the message going forward is that the UK unemployment rate will be the key indicator as to when the BOE is likely to move interest rates or apply quantitate easing. This means the employment data which is normally released the middle Wednesday of each month (next being 14th August) will have far more of an impact on where GBP stands than it’s done in the past.

So after some sharp moves yesterday the pound has now settled back a little more respectably. We now see the following, GBP/EUR 1.1610 GBP/USD 1.5500 and EUR/USD 13350.

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