Lots Of Talk From UK and Eurozone
The pound put on a brave face even after a series of disappointing developments. First we saw negative M&A flows, then weak Industrial Production data followed, and today’s Trade Balance is also unlikely to impress.
BoE governor Mark Carney also confirmed that his decision on the rate hike timing would not be affected by the UK general election scheduled for May 2015. SO, expect the markets to start coming under pressure with 12 months to go. Moreover, Carney says he expects an increase in investment, which is crucial for spurring growth but is certainly not complacent about UK recovery. Furthermore, there appears to be good news on the wage front as MPC member David Miles believes that real wages could stop declining shortly as we are nearly at the point when average wage settlements are moving above the rate of inflation
In Europe, it appears that the board members are on a bit of a speaking tour as lots of comments are coming out regarding future economic policy.The ECB has honed its forward guidance on interest rates by giving investors a new economic gauge to watch and have cited the so-called output gap as a reason why the 18-nation euro area will need low rates even after growth and inflation pick up.
Mario Draghi is trying to assure investors that he’ll avoid the mistake of his Jean-Claude Trichet who raised borrowing costs in 2011 and inadvertently heightened a sovereign debt crisis that almost fractured the single currency. Other comments have maintained that growth is returning to Europe, the single supervisor mechanism is on track, European institutional environment is still weak, as is money supply. Also, anchoring inflation expectations is key to ECB success.