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Posted July 5th, 2013 by Charles Purdy

New BoE Governor speaks, sterling plummets | Smart Daily Currency Note

GBP/EUR – 1.1668

Yesterday’s expression of the day was forward guidance – indication from an interventionist central bank as to what they are going to do with interest rates into the future. In his first act at Governor of the Bank of England, Mark Carney issued a surprise statement yesterday which expressed the Bank’s concern over rising gilt yields, and said that any rise in interest rates which might erstwhile have been implied was not warranted. Markets read this as the MPC giving forward guidance that interest rates would remain at record lows for the foreseeable future, and sterling plummeted across the board, breaking below 1.16 and 1.51 against the euro and US dollar respectively. While we saw a little recovery against a similarly weak euro, sterling stayed at 5-week lows against the US dollar. Away from our new Governor, PMI figures released earlier in the week made it clear that the recovery is well underway showing growth across the board including particular strong figures from the services sector which saw sterling strengthen mid-week. Today is much quieter on the news front, and sterling will trade in the wake of yesterday’s announcement. With traders heading back to their desks in the US, we could well see more excitement, call Smart today to find out how things are looking.

After struggling through the week, with unemployment reaching new all-time highs and PMI figures disappointing, the euro took a further spill yesterday following the ECB meeting. Mario Draghi, President of the European Central Bank, joined the ranks of the interventionists when he said that, “ECB interest rates will remain at present or lower levels….for as long as necessary.” The unprecedented move to assure markets of future plans pulled the rug from beneath the euro, which dropped a cent against the US dollar on the news. The Portuguese question continues to hang around, as politicians battle to hold a straining coalition together. Call your trader today for the latest news and up to the second rates.

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