Post-BoE Governor Carney Speech: 22 May British Pound Trading Outlook


Those with an interest in the British Pound will be watching the Governor of the Bank of England Mark Carney and other members of the Bank’s Monetary Policy Committee (MPC) testifying before Parliament’s Treasury Select Committee. What can we expect? Analysts at ADS Securities provide a sneak peek on what to expect from today’s 22 May British Pound Trading Outlook.

22 May, ADS Securities – Lower US Treasury yields and an improvement in risk sentiment helps the European and commodity currencies bounce higher. The Dollar retreated during the first 24 hours of trading allowing the likes of the Euro, Pound and commodity dollars to catch their breath and score gains while casting doubts on whether there’s more room for the US currency to extend its rally.

A second day of weakness in US Treasury yields is behind the pullback in the greenback and with Dollar traders on the sidelines until the release of fresh US PMIs and the FOMC minutes tomorrow we could see further consolidation.

Post-BoE Governor Carney Speech: 22 May British Pound Trading Outlook

The spotlight today will fall on the Pound ahead of BoE Governor Carney’s testimony on inflation before the Parliament’s Treasury Committee. The Bank of England had been rather bullish at the beginning of the year and was planning a rate hike around mid-2018 to arrest the rallying inflation but things have changed dramatically since then. The slowdown in domestic growth and comments from the central bank that inflation should retreat faster than initially expected downplayed the odds of a rate increase and the Pound has taken a considerable dive.

Carney’s speech today will likely toe the same cautious line. The Governor will acknowledge the downtick in the performance of the UK economy but he will spend more time discussing the prospects of inflation falling closer to their 2% target. The takeaway of his speech – barring any bullish surprises – will be that the BoE doesn’t plan to hike rates at this time and even though he will leave the door open for a move later in the year a steady policy will be the key message.

Should this be the case the Pound’s bearish outlook will remain in place and even though a correction towards the 1.35 area could be in the cards, this will be primarily fueled by Dollar’s short-term weakness. As such, we believe that sellers will re-emerge around that area and re-establish their Pound/Dollar shorts with a view to drive the currency towards the 1.33 floor. Tomorrow’s CPI reading will also play a key role in dictating Pound’s direction and a potential surprise lower could again spell disaster for Sterling.

Equities Markets

In the equities’ universe, the Asian markets are trading slightly lower this morning even though the US session was strongly bullish with the Dow Jones closing above the 25,000 points’ barrier. The US markets are looking bullish on the short-term on the back of easing tensions and lower Treasury yields but on the other side of the pond Italian politics are casting doubts. The European futures are trending mostly lower this morning and with analysts and investors growing concerned about Salvini and Di Maio’s policy plans we should see limited risk appetite in Europe today.

DS Securities Risk Disclaimer

This article was provided by analysts of ADS Securities.

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