Talking Points

- The British Pound tumbled against the US Dollar and the Euro after Bank of England Governor Mark Carney said now is not the time to raise UK interest rates.

- UK 10-year government bond yields fell below 1% and interest rate futures climbed.

- Don’t miss the European Desk Round Table webinar, starting at 1000 GMT.

Sterling fell sharply in Europe Tuesday after Bank of England Governor Mark Carney said in his delayed Mansion House speech that now is not the time to raise UK interest rates.

His speech will likely be seen as a response to the recent 5-3 vote by the Bank’s monetary policy committee to keep rates on hold – with the three dissenters all voting for an increase. While the markets are still not expecting UK rates to be raised for many months if not years, his speech reinforces the view of the BoE staff on the committee that to do so would be a mistake. Following it, GBP/USD fell to its lowest level for a week.

Chart: GBP/USD Five-Minute Timeframe (June 20, 2017)

British Pound Tumbles After Carney Rules Out UK Rate Rise

Chart by IG

The Pound also weakened against the Euro, with EUR/GBP jumping from 0.8740 to 0.88 in the immediate aftermath of the speech. The yield on ten-year Gilts – UK government bonds – fell below 1% for the first time since June 15 and short sterling interest rate futures climbed.

Carney warned of weak wages growth and a likely hit to incomes as the UK prepares to leave the European Union.

--- Written by Martin Essex, Analyst and Editor

To contact Martin, email him at martin.essex@ig.com

Follow Martin on Twitter @MartinSEssex

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