The British pound finished yesterday’s trading day with a broad sell-off across the board after Bank of England Governor Carney delivered some unexpected remarks in a speech yesterday. The currency recovered some ground during the Asian session.
At a conference in London, BoE’s Carney said that the central bank was ready to make imminent changes to the monetary policy given the recent weakness in the UK economy.
Markets have interpreted those comments as a rising possibility of a rate cut and started selling the pound across the board.
Carney also added that “… a reasonable judgement is that the combined conventional and unconventional policy space is in the neighborhood of the 250 basis points cut to Bank Rate seen in pre-crisis easing cycles.” Quantitative easing, rate cuts, and forward guidance remain all parts of the central bank’s tools.
Looser monetary policy had been expected in 2020, but the Conservative election win and the fact that Brexit will be delivered in January 2020 eased loosening bets to some extent.
According to Mizuho Bank in London, comments made by Carney wasn’t the only reason for the sterling sell-off. Earlier this week, EC President Ursula von der Leyen said that it would be “impossible” for the UK to strike a trade deal with the EU in the next 11 months.
From Norway, markets await the CPI index for December, which is expected to slightly weaken to 1.5% from the previous month’s 1.6% year-over-year.
Energy prices continue to slide following the easing tensions in the Middle East with Brent crude down 0.20% for the day.
From a technical standpoint, the pair continued to trade inside a range with the 11.65 level acting as a mid-term resistance level to the upside.
The pound managed to recover some ground after the sell-off and traded at 11.6280 against the Norwegian krone, as of 7:00 a.m. London time.
