The pound is lower against the euro this morning as a combination of euro strength and mixed messages from BoE Governor Mark Carney saw GBP/EUE lower by about 1 cent. Previously it was thought that an interest rate hike would come at the end of the year, but now it sounds like Carney is trying to get the message across that the central bank won’t start to think about a rate hike until the end of the year, two very different messages. Carney arrived at the Bank of England with a reputation as a great communicator but this is another example of how he’s not. He’s made this comment 3 times now and that’s because he wasn’t clear the first time. Carney also commented that headwinds to growth are coming from Europe, the strong pound and fiscal adjustments. “Higher interest rates are likely to be needed over the course of the next few years”. “The decision as to when to start that process of raising interest rates will likely come into sharper relief around the turn of this year”. What stands out today is the comment on the pound. It could be the start of a period of jawboning from Carney. Against the dollar there was a small gain as the greenback was sold off against the euro, pushing cable higher.
The euro seems to be taking a breather over the last 24 hours as it makes back some losses against the majors. The S + P helped euro at least get a steady footing after lifting Greece’s rating from junk, up two notches after Athens paid its dues on both the ECB and IMF, and Greece finally opened its banks. This saw the single currency rise against both the dollar and sterling. Athens was able to make payments because it received a €7.16 billion bridging loan granted to Greece last week by the EU so that it could pay its debts on time. Elsewhere, the Greek Parliament will vote today on a second set of reforms needed to secure its bailout deal. if MP’s approve the financial and judicial reforms, Greece will be able to press ahead with negotiations for an €86bn bailout from its creditors.
US stocks fell after weak earnings reports from IBM and United Technologies dragged down the DOW. Treasuries meanwhile strengthened as demand rose for safer assets while oil ticked higher on a weaker dollar. Cable saw some strength which pushed GBP/USD over the $1.56 handle while EUR/USD also rose to trade over the $1.0950 level. On the data front, US June industrial output was revised one-tenth lower to +0.2% M/M while the Philadelphia Non-Manufacturing Regional Business Activity Index fell to 8.1 in July from 54.1 previously. After the closing bell, Apple shares slid 6.7% to $122 as the company’s revenue outlook for the current quarter fell short of Wall Street expectations.