Forex snapshot

Mark Carney's comments have pushed the pound higher while the euro pulls back lost ground.

A pound coin
Source: Bloomberg

Sterling eyes $1.70

The pound is trading at $1.6982, up 0.3% after Mr Carney stated the Bank of England could increase interest rates sooner than traders expected.

The announcement pushed the pound higher versus the US dollar, but it didn’t have the momentum to reach $1.70. George Osborne has given the BoE the power to limit mortgage lending by UK banks, and Mr Carney will use this to rein in borrowing by homeowners.

In the short term I think the pound could trade above the $1.7 mark, but I suspect that Mr Carney was sending a message to the markets that interest rates will not stay at historic lows forever.

At 1.30pm, the US will reveal the latest PPI report and the consensus is for an increase of 0.1%. If the figure is stronger than expected we may see some profit-taking which could put the pound on a path towards £1.6850.

Spot FX GBP/USD chart

Euro off lows

The euro has managed to pull itself off its lows despite underwhelming figures from the eurozone this morning.

The euro is trading at $1.3564, up 0.9% even though French unemployment and Germany consumer price index were weak. The one saving grace was that both reports were in line with expectations. The euro traded as low as $1.3519 yesterday but has started to pull back some of the week’s losses today.

On Monday, traders will be focused on the eurozone CPI figure at 10am (London time). The reading in May was 0.5%, and if the report shows a decline in June this will put pressure on EUR/USD.

Alastair McCaig stated, if the euro drops below $1.3505 the next level down to watch out for is $1.3477.

Spot FX EUR/USD chart

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.

Find articles by analysts