The Bank of England’s MPC minutes and Carney’s speech in Scotland have put a offered tone in the pound. There’s not too much of a stray from the party line we’ve heard recently but the hawkishness seems to be coming out in the comments.
It’s subtle at the moment but the emphasis is rising on the risks to the economy and a potential slowdown later in the year. Price pressures are still being sought but not found or developing and that may take some of the pressure off early rate rise expectations.
As I explained early on in the year the UK needs to see offshore activity pick up to help take the baton from what has been a domestically driven recovery. The fact we’re 25% below the pre-crisis levels goes along way to seeing how difficult that may be.
We may not see the economy go backwards but there’s a risk we see things tail off and flatten in the months ahead. That will make the rate rise crowd very worried.
Cable has pushed down to 1.7025 and my view from here is that we may see the bias switch to bearish on the pound. I’m going to be thinking about selling any decent rallies as I agree that there is a good possibility the recovery stutters from here on out. If we get a decent GDP number on Friday that may give some better levels to short at.
Carney is on to some Q&A now so we’ll see if we get anything juicy from that
