- Sterling slips as Carney does what Carney does
- Reserve Bank of Australia upbeat, but has concerns
- US housing data could stabilise USD
By David Johnson
I mentioned yesterday that this was a week for the central bankers and it started with the Governor of the Bank of England (BoE) doing a bit of oar-dipping on the Brexit debate. As is Mark Carney’s wont, he managed to undermine the Pound with his rhetoric. He spoke of the inflationary impact of Brexit but was, if anything, slightly less hawkish than he has been. Sterling slipped, but traders are still of the belief that we will see a UK interest rate hike before the year end. I am not so convinced. The BoE ran inflation well above target for the first 10 years of their independence, so, as Mark Carney thinks the current level is caused by the fall of Sterling and the actuality of Brexit doesn’t happen for a year or so, I think they will delay rate hikes for a little longer.
Mark Carney also said that the greatest influence on the UK's prosperity over the medium-term will be Britain’s relationship with the EU, post Brexit. It will certainly be an influence, but we have to remember that the EU, as a share of global Gross Domestic Product (GDP) has been falling for quite some time. Depending on how you measure it, the EU makes up something between 13% and 17% of the global economy. So the greater influence on the UK will probably be how well we engage with the other 83% or so of the global economy. If we do that well, leaving the EU could be reduced to a short term inconvenience.
Overnight news included the release of the minutes from the last Reserve Bank of Australia (RBA) meeting. They were quite upbeat on the outlook for the Australian economy – citing improving employment data – but they expressed concerns over the strength of the Australian Dollar and levels of household debt. The Aussie Dollar shimmied, but didn’t really move a lot.
China has been commenting on its crackdown on crypto-currencies like Bitcoins. They see their actions as necessary to maintain the security and integrity of the Chinese financial system. It certainly knocked the value of these virtual currencies, but they have bounced back rather robustly.
Today’s data diary includes little other than the US housing data, but that is expected to be rather upbeat. The US Dollar’s recent decline may not be reversed, but should be abated for a while if that proves to be true.
And you can’t help but feel the pain of many of the Caribbean islands. Yet another monster storm is making its way across the region, taking buildings and livelihoods as it goes. Let’s hope it doesn’t take lives as well. Fingers firmly crossed.