Inflated Brexit

BoE and Brexit GBPEUR has been range-bound this week €1.12 to €1.13 following Thurday’s sudden drop into the 1.10s. This morning UK inflation data briefly boosted the £. The reading of 3% was expected, reaching the highest level in 5 ½ years and is at the upper bound of the BoE’s threshold target of 2% plus or minus 1%. If inflation rises above 3% the Governor of the BoE, Mark Carney, who chairs the 9 strong Monetary Policy Committee (MPC) will need to write an open letter to the Chancellor explaining why inflation is elevated, offer the committee’s proposed remidy and detail the length of time they expect inflatio rates to overshoot their target. Coincidently MPC members spoke shortly afterwards in pariliament and although many bank analysits are prepared for a November interest rate hike it’s clear we remain vulnerable to any economic slowdown related to Brexit or to any poltical deadlock in negotiations. We could therefore see the recent supporter for the pound fade. Mark Carney, Governor:   “I think it’s more likely than not that I will be writing on behalf of the MPC a letter to the chancellor. We expect that inflation will peak in and around the October figure, October-November figures, peaking potentially above the 3 percent level.” Silvana Tenreyro, external member of MPC, said she’ll only vote for a rate rise in the coming months if economic indicators are in line with current expectations, otherwise she’ll wait. David Ramsden, Deputy Governor On Interest Rates “I voted to maintain bank rate at a quarter percent. A majority of MPC members saw a case for removing...

BoC softens tone GBPCAD higher

Last night the governor of the Bank of Canada (BoC) said thee central bank will proceed “cautiously” with additional interest rate rises. The economic situation is less certain and inflation “surprisingly soft”. Many had expected an additional rate rise in 2017 but this is now less likely. The BoC have lifted interest rates twice this year, once in July and earlier this month. While monetary policy is data-dependent and therefore subject to change, this fresh assessment does help GBPCAD move higher. GBPCAD has gained over 5% since the 4th of...