- GBP/USD – Carney said that more infrastructure and higher corporate spending needed to boost the British economy
- Pound to Dollar – Demand for the dollar dropped in the previous session as safe haven flows eased
After rallying to a peak of US$1.2968 on Tuesday the pound settled around support at US$1.2957. Stronger than forecast GDP figures combined with calls from the Bank of England’s Mark Carey for higher infrastructure spending overshadowed a well-balanced speech from Federal Reserve Chair Jerome Powell.
GBP/USD is holding steady in early trade on Wednesday as investors digest EU threats and look to Fed Chair Jerome Powell’s second day in Congress.
More infrastructure and higher corporate spending needed to boost the British economy, Carney says
In a speech before the House of Lords economic committee on Tuesday, Mark Carney said that more infrastructure spending and higher corporate spending is needed to boost the lacklustre British economy. He said that he viewed low interest rates staying for the foreseeable future, adding that a low interest rate environment supported additional fiscal capacity.
His comments came after UK GDP data showed that on an annual basis, the UK economy grew at an above expectation 1.1%. Analysts had pencilled in growth of 0.8%. However, on a quarterly basis the UK economy stagnated. This wasn’t a surprise.
Recent surveys have indicated that confidence has improved since the December election, the question is whether this will translate into improved hard data going forwards. Month on month GDP grew 0.3% ahead of the 0.2% forecast; a possible signal that economic activity could slowly be picking up.
Today the UK economic calendar is quiet. Investors will focus on Boris Johnson’s spending plans and any Brexit deal headlines. Any gains in the pound could be capped as the EU dash expectations over the City of London being able to do business across the region after Brexit.
GBP/USD – Safe haven flows eased, dropping the demand for the dollar
and as Federal Reserve Chair Jerome Powell didn’t drop any surprises into his testimony before Congress.
In his semiannual testimony Jerome Powell said that he considered the current stance of monetary policy as appropriate. He highlighted the strength in the labour market. Powell also said that the Fed was “closely monitoring” coronavirus and its impact on China and the knock-on effect that it could have on global economic growth. Fed Powell added that he considered the US economy to be resilient to global headwinds. His well balanced speech meant t he reaction from the US dollar was limited.
Today Powell will appear before the Senate. Another even speech could leave dollar investors with little to go on. Coronavirus headlines will also continue to be monitored as the rate of spread appears to be slowing and as the World Health Organisation says a vaccine with be ready in around 18 months.
