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Early trading has seen a degree of volatility, with markets edging higher again ahead of the Bank of England minutes before rapidly turning tail, as the text showed a remarkable U-turn in sentiment at the Monetary Policy Committee. In what might be viewed as a snub to former governor Sir Mervyn King, the entire committee voted to keep the asset purchase policy unchanged, with the two remaining doves flocking to the hawkish camp.
Mark Carney has put a rocket under the pound this morning, after the consensus at Threadneedle Street switched to a more cautious view of the economy. The minutes said that the committee did see improvement in the UK but cautioned that it was still gradual, concluding that it would be better not to change policy at this meeting. This somewhat disrupts the narrative of Mark Carney being a firm fan of more easing, but it would have been a rash move to invoke a change of policy so soon after his arrival. However, once the next inflation report is out of the way, the Canadian may yet surprise markets with a new approach.
All eyes now turn to Ben Bernanke, as the world’s most powerful central banker takes his seat in front of US lawmakers this afternoon. His last speech helped power the latest leg of the rally in risk assets, but it could easily perform its own U-turn if the chairman seems to distance himself from the comments made last week. We also have housing starts and building permits, so it is going to be a busy afternoon. Ahead of the open, we expect the Dow Jones to start down 35 points at 15,415.