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GBP USD Stumbles in Anticipation of BoE Carney's Speech

GBP USD Stumbles in Anticipation of BoE Carney's Speech

The BofE's next Monetary Policy Committee decision on interest rates is schedule for November 2 when it will also publish its quarterly Inflation Report.

The pound rose as much as 3.3% last week, jumping more than four cents to $1.3618 on the back of hawkish messages from the Bank of England and Gertjan Vlieghe, one of the bank's rate-setters normally considered a dove.

Carney reiterated that some withdrawal of monetary stimulus is likely to be appropriate over the coming months.

The pound to euro exchange rate has dropped 0.04% this morning after the Bank of England's governor said future interest rate hikes will be "limited".

"Any reduction in openness with the European Union is unlikely to be immediately compensated by new ties of a similar magnitude with other trade partners", the BOE governor said. The kiwi traded at 72.80 U.S. cents from 72.88 cents in NY.

A sharp fall in migrant workers coming to Britain as a effect of Brexit could push up wages and cause a spike in inflation in the short term, according to the governor of the Bank of England, The Guardian reports. The pound-dollar pair could also benefit from the Federal Reserve being "viewed as less likely to follow through with a final rate hike this year", said analyst Lee Hardman in a note.

"Importantly, this change is not based on a change in our macro forecast: "no-change" remains the only policy action consistent with our growth and inflation outlook", they wrote.

"While the BoE looks genuinely minded to raise interest rates sooner rather than later, a hike before the end of 2017 still looks far from inevitable".

Beyond this, many investors have claimed that the central bank will announce the start of a reduction in its $4.4 trillion balance sheet on Wednesday; the reversal of its quantitative easing (QE) scheme notable in signalling an increasingly hawkish trend within the Fed. With HSBC now expecting a rate rise in November, there is no surprise that we are seeing the pound come into favour.

A spokesman for Lloyds Banking Group said its economics team should update its view on interest rates in the next few days.

The benchmark FTSE 100 was up 15 points or 0.20 percent at 7,268 in late opening deals after rising half a percent the previous day.

At the same time, expert focus is pivoting from monetary policy to the fiscal policy side, as the Cabinet's new economic measures are poised to benefit the economy to a greater extent than monetary policy, the effects of which are waning after nearly a decade of quantitative easing.



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