Daily currency report
Sterling’s dismal start to the year looks set to take another twist with the Bank of England preparing to announce its latest monetary policy decision while Mark Carney readies his notes before going up in front of Parliament. Carney, who will take over from Governor Mervyn King in July, will present his British monetary policy vision to a Treasury select committee. Worries he will match Chancellor George Osborne’s warning that monetary policy could be stretched further, and discuss radical structural changes to policy targets, forced the sterling to six-month lows against the US dollar. Draghi’s post-ECB comments have often had a substantial effect on financial markets and his surprisingly optimistic speech in January was central to the euro’s remarkable rally. On the data front, UK industrial and manufacturing output data will be published alongside Britain’s latest trade figures before US weekly jobless claims data.
The Bank of England will announce its February verdict on monetary policy but the decision is likely to be overshadowed by the bank’s future Governor, Mark Carney, who will attend a session in Parliament and face questions from a Treasury select committee eager to learn more about his monetary blueprint for the UK economy. The BoE is expected to refrain from adding to its quantitative easing total of £375 billion and also keep interest rates at 0.5 per cent despite a rare notice from Chancellor George Osborne that more could be done with monetary policy to aid the British economy.
The US dollar rose broadly as investors preferred safety bets ahead of key updates from central banks in the UK and eurozone, pushing the greenback close to six-month peaks versus the British pound. The greenback gained against the euro amid concerns European Central Bank president Mario Draghi will look to play down optimism about Europe’s economic outlook. The US dollar’s move higher versus sterling was led by worries before Mark Carney, who will take over at the Bank of England in July, faces a cross-examination in Parliament.
Caution in front of European Central Bank monetary policy announcement weighed on the euro with investors worried that much of President Mario Draghi’s press conference will focus on the euro’s exchange rate. The single currency’s rapid climb to 14-month highs against the US dollar saw French President François Hollande call for exchange controls.