Treasury Select Committee comments continue to weigh on GBP/USD
Trying to decipher what yesterday’s comments from the Bank of England mean in comparison to Mark Carney’s Mansion House speech, continues to preoccupy currency traders. The clear message over a week ago was that the BoE would be raising rates earlier than markets had anticipated. This was the boost that GBP/USD needed to finally break above the five-year highs from August 2009, and trade above the $1.7000 level. Yesterday, however, when grilled by the Treasury Select Committee the governor appeared to backtrack on these comments, triggering an instant selloff in cable.
So where are we? It is very unlikely we could see an increase in the base rate in Q3 2014, and to instigate it in Q4 when the retail market is gearing up for its hugely important year-end festive sales would jeopardise the whole retail sector. With this being the case, Q1 2015 looks to be the earliest that the bank could act, and only if the countries productivity has improved and begun to increase earnings too.