Carney dodges the question
The Pound weakened across the board yesterday, falling by 1% against the Euro and 1.16% versus the Dollar. The UK currency fell as Bank of England (BoE) Governor Mark Carney testified to the Treasury Select Committee, warning that threats to the independance of the BoE could tarnish Sterling and prompt investors to flee UK assets. Carney also raised concerns as to the risks of perpetually low interest rates and dodged the issue of his tenure, due to end in 2018, stating that it is a personal decision.
Meanwhile, Theresa May has sought to play down perceived criticism of Carney and Chancellor Hammond has stated he wouldn’t object to further Q.E. if it were required. All of which reduces expectations that UK interest rates will be lowered at the start of next month.
The German IFO index was stronger than expected with an increase to 110.5 for October from 109.5 the previous month. The current situation and expectations readings also improved for the month; following strong PMI data on Monday, overall confidence in the German outlook strengthened further.
European Central Bank (ECB) President Draghi expressed some concern over the longer-term instability risks of keeping interest rates at very low levels. He also continued to insist that the bank would maintain an expansionary policy to meet its inflation target.
The US consumer confidence reading printed weaker than expected with a retreat to 98.6 from 103.5 the previous month with a slightly less optimistic tone surrounding the labour market. The IBD economic confidence data recorded an increase in confidence and the Richmond Fed index improved slightly over the month. House prices again recorded a solid gain.
The consumer confidence data triggered an initial retracement with Sterling moving back towards 1.2200 versus the Dollar. There was a sharper retreat late in the European trading session as the US currency lost all the daily gains with the Euro moving back towards, but not above the 1.0900 level.
Data To Watch: 7am EUR GFK Consumer Confidence Survey.1.30pm US Goods Trade Balance.2.45pm US Markit PMI Composite.US Markit Services PMI.3pm US New Home Sales.