Rate hike uncertainty spoiled what could have been an incredibly hawkish day for the pound, given that inflation hit a 5 year high of 3.0% in September.
The Bank of England ended up distracting sterling from that alarmingly high CPI reading. New deputy governor Dave Ramsden was pretty dovish this morning, and while his MPC peer Silvana Tenreyro was slightly more open to a rate hike, she said any move is ‘very contingent on the data’ (which, at the moment, isn’t a great sign for sterling).
BoE chief Mark Carney arguably dealt the biggest blow to the pound. Though the central bank head honcho said the MPC thinks a hike may be appropriate ‘in the coming months’, that comment potentially pushes the pulling of the interest rate trigger beyond the Bank of England’s next meeting in early November.
That wasn’t all. Carney warned on the negative impact a ‘no deal’ Brexit would have on the economy, while stating that businesses are ‘less confident about a smooth transition’. The OECD also got involved, claiming a ‘disorderly’ Brexit would reduce Britain’s ‘long-term growth’.
Combine that with the prospect of some miserable wage growth and retail sales figures on Wednesday and Thursday respectively, and some decent import prices and industrial production data from the US, and cable had a truly dreadful afternoon. The pound fell 0.7% against the dollar, sending it back towards $1.31; sterling fared a bit better against the euro, and even then it slipped 0.3%. The FTSE couldn’t squeeze too much growth out of this situation, with the UK index still stuck below 7550, a level its struggled to break for the past week.
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