13 Jun 2014
EUR/GBP continues to slide on Mansion House momentum
FXStreet (London) - EUR/GBP remains in a bearish trend on continuing momentum from Bank of England governor Mark Carney’s remarks to Mansion House.
Speaking at the Lord Mayor’s Banquet for Bankers and Merchants of the City of London at the Mansion House, Carney gave his strongest indication to-date that he could be prepared to raise rates early in light of stronger-than-forecast economic growth.
Carney stated that he believes that the UK economy is currently unbalanced internally and externally.
“Internally, there is wasteful spare capacity – an output gap – concentrated in the labour market. The Monetary Policy Committee (MPC) currently estimates this gap to be around 1-1.5 percent of GDP, though we caution against false precision as there are wide confidence bands around this central view.”
Carney added: “There’s already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced.
“It could happen sooner than markets currently expect.”
However, the BoE governor was quick to add that the central bank has no fixed date for a future rate hike. “The ultimate decision will be data-driven. At this point it is safest to conclude, as the MPC has, that there remains scope for spare capacity to be used up before policy is tightened and that a host of labour market, capacity utilisation and pricing indicators should be watched closely to determine how that slack is evolving.”
EUR/GBP has declined 0.26 percent on the session, currently trading at GBP0.7982.
Speaking at the Lord Mayor’s Banquet for Bankers and Merchants of the City of London at the Mansion House, Carney gave his strongest indication to-date that he could be prepared to raise rates early in light of stronger-than-forecast economic growth.
Carney stated that he believes that the UK economy is currently unbalanced internally and externally.
“Internally, there is wasteful spare capacity – an output gap – concentrated in the labour market. The Monetary Policy Committee (MPC) currently estimates this gap to be around 1-1.5 percent of GDP, though we caution against false precision as there are wide confidence bands around this central view.”
Carney added: “There’s already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced.
“It could happen sooner than markets currently expect.”
However, the BoE governor was quick to add that the central bank has no fixed date for a future rate hike. “The ultimate decision will be data-driven. At this point it is safest to conclude, as the MPC has, that there remains scope for spare capacity to be used up before policy is tightened and that a host of labour market, capacity utilisation and pricing indicators should be watched closely to determine how that slack is evolving.”
EUR/GBP has declined 0.26 percent on the session, currently trading at GBP0.7982.