Mark Carney appeared to signal his intentions as the new Bank of England Governor, sending the British pound crashing to new lows by issuing a rare statement alongside the bank’s policy decision. The move added to fears that Carney will introduce more monetary activism over the coming months in an attempt to boost the UK economy.

With sterling again within reach of three-year lows against the US dollar, the euro is within striking distance of six-week lows against the greenback. US employment is expected to stretch currencies even further and the US dollar could march higher if the numbers bolster views backing the Federal Reserve to become the first major central bank to start tightening its monetary policy.

Sterling

Carney announced his arrival at the Bank of England with a bang, issuing a rare statement alongside the Monetary Policy Committee’s policy decision, which sent the pound crashing in currency markets. The new governor underlined his reputation as a strong policy communicator, giving markets key insight into central bank decision making. Carney indirectly told markets that UK interest rates will remain near rock-bottom for a number of years, in the hope that this “forward guidance” would help dampen recent swings in UK gilts, or government borrowing rates.

US dollar

The US dollar rose to new highs against its European counterparts as investors weighed the Federal Reserve’s hawkish monetary policy outlook against new stimulus strategies from the Bank of England and European Central Bank. Critical US non-farm payrolls data could bolster views of the Federal Reserve, reducing its monthly bond purchases as it becomes more comfortable with the pace of hiring in the US economy.

Euro

The euro suffered a bruising session after President Mario Draghi rivalled the Bank of England in terms of guiding the markets by telling investors that the European Central Bank could still do more with policy. Draghi said that not only will interest rates remain at record lows for an “extended period”, but there is a possibility the ECB will cut rates even further to support economic growth. The ECB held rates steady at 0.5 per cent as expected. Draghi’s usual stance is that the ECB does not “pre-commit” to where interest rates will be, meaning his change in communication surprised currency traders who immediately shunned the single currency.

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