Markets look to Carney to reignite Sterling (+video)

Sterling has come under renewed pressure after a short rally yesterday as monetary policy expectations have been extended further. With disappointing economic data out earlier this year from manufacturing, industrial production and inflation readings, attention will be focused on today’s speech by Bank of England Governor Mark Carney.
 
He’ll be testifying on the Financial Stability Report before the Treasury Select Committee. With concerns mounting over global growth, there may also be discussions on falling commodity prices affecting inflation in the UK for the investors to take note of. GBP/USD opened weaker this morning.
 
Greenback continues its strong showing
 
The Greenback has continued its rally against most of its major counterparts after a brief uptick in oil prices subsided yesterday. Ever since the Federal Reserve increased interest rates, the US dollar has continued to consolidate gains amid falling stock markets – and the growing pressures on oil prices have pushed investors back to the currency as a safe haven.
 
Data released yesterday from the US revealed that the Dallas manufacturing index dropped considerably, to -34.6, raising concerns that the Federal Reserve may go off-track from its plans to lift rates incrementally. Services Purchasing Managers Index, house price data and consumer confidence data are out today from the US to provide further direction for the dollar.
 
Draghi defends ECB’s current plans
 
Mario Draghi, President of the European Central Bank, delivered a speech yesterday launching a staunch defence of the central bank’s accommodative monetary easing policy to counter criticism of the policy. In fact, he went a step further and said that the central bank is prepared to cut rates and also “review and reconsider” further quantitative easing as a premature increase in interest rates could bring about yet another recession.
 
German business sentiment data out yesterday showed a slight drop in confidence, though markets have been pacified by Mr Draghi’s comments and EUR/USD has climbed up just under the 1.09 level.

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