Carney Starts At The End Of A Busy Month

It’s the last working day of June and Monday will see not only the start of a new month, but the dawn of a new era at the Bank of England as the Canadian Mark Carney takes up the helm of Governor.

By happy coincidence Monday the 1st July is also Canada Day, a fitting day for Dr Carney to take charge. However, he will quickly discover that his new role is an enormously challenging one, with the UK’s economic recovery bumping along in a fragile fashion and a range of challenges to overcome on the horizon.

Check out Jeremy’s video report from Central London on the blog today to hear more about what he thinks lies ahead for the new man at the BOE.

Sterling was the weakest major currency yesterday with downward revisions to GDP figures and a wider than forecast current account deficit. The services index for April is out this morning and will give some indication of how strong Q2 GDP will look. Even with a slight fall month on month for the services number, we would expect to see reasonable growth in the second quarter, though the initial reaction is likely to be a test of the 1.52 level.

The euro traded sideways yesterday and seems anchored around the 1.30 area in the absence of any specific European news. Eurogroup head Juncker opposed a weaker euro as a route to easier monetary policy which is not the majority view of the ECB, but suggests we will see limited weakening rhetoric from the European policymakers. German inflation is the only data of note today and expected to be slightly higher than the previous release (1.8% y/y against 1.6% in May).

Everybody’s focus remains on the US dollar and the will they, won’t they taper chatter. We had a further three Fed officials trying to steer the market yesterday, with the general message that the market is overestimating how soon and how aggressively stimulus will be removed. The Chigago PMI and Michigan confidence readings will add further fuel to the fire.