Mark Carney’s testimony was the highlight of a quiet European session. The Governor of the Bank of England used his appearance before MPs on the Treasury Select Committee to lay out his plans to allow EU banks to continue to operate almost as normal in Britain post Brexit. He intends to enable this by the use of branch status, much like US and Japanese counterparts.
This stroke of genius by Carney, encouraging EU banks to remain operating in the UK, will go some way to helping to preserve financial stability in both UK and the EU, while simultaneously helping to protect the City of London’s position as Global Financial Centre. Carney has laid down the gauntlet protecting the UK financial centre at a time when the EU are trying to create their own pre-negotiation position. Carney has managed to address one of the hot topics of Brexit for the markets and in doing so has offered a certain amount of tranquillity to investors, squashing thoughts and rumours that the day after Brexit the European banks would pack up and leave.
Market reaction
The pound was impressed, jumping from a previous sub $1.34 level, to the day’s high of $1.3419. The stronger pound did little to help the FTSE which has languished in the red for the majority of the day and increased those losses as Wall Street turned negative as it opened in the afternoon.
Mixed open on Wall Street
US major indices were mixed on Wednesday, the S&P and Dow pushing higher in the search for new milestones, whereas the tech heavy Nasdaq slumped. The mixed open comes following the Senate approving the US tax reform bill and as the bill moves back to the House for a final vote, due to a procedural hammer in the works. The market is certain this is going through now – the risk was with the Senate due to the tight margins and they pushed it through with three votes to spare. This is a good as on Trumps desk for signing already.
Bond yields higher, dollar lower
Interestingly the dollar continues to fall, despite treasury yields racing higher. Investors are dumping US Treasury bonds, pushing the yields higher, as they move into stocks. This is a strange phenomenon to see the dollar fall whilst bond yields rise, as usually stronger yields go hand in hand with a stronger currency. The dollar fell below 93.00 versus a basket of currencies in its third consecutive down day.
Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.
Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.