Spreadex Market Update

Carney causes sterling to slide following hints of impending rate cut



Mark Carney did a number on the pound in one of his final appearances as Bank of England head honcho.

The Canadian – who leaves Threadneedle Street in March – stated in a speech this Thursday that ‘if evidence builds that the weakness in activity could persist, risk-management considerations would favour a relatively prompt response’. In other words, Carney laid the groundwork for a potential interest rate cut in the coming months, from 0.75% to 0.5%.

Sterling reacted accordingly, dropping 0.4% against the dollar and euro alike. That sent cable back below $1.305 – it had opened the year at $1.325 before Brexit anxiety and weak data took its toll – while against the single currency the pound slipped to €1.175.

This was all good news for the FTSE, with sterling’s losses helping to solidify its half a percent increase. That put the index ahead of the CAC, which rose 0.3%, and the Dow Jones, which was up 0.4%, but behind the dramatic DAX, continuing a week of big swings with a 1.3% surge.

The market-wide gains come after the USA and Iran appeared to pull back from the brink, the latter’s missile attack on the former’s bases in Iraq seemingly enough retaliation for the assassination of Qassem Suleimani. It is, of course, far too early to say that is definitely the case; for now, however, the reduction in sabre-rattling from Donald Trump is enough for investors.

It may also mean that Friday’s US nonfarm jobs report has the room to make a proper impact, which could be bad for the Dow if the headline figure suffers the expected fall from 266k to 162k month-on-month.

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