Sterling Digest, 9 July 2013: the Carney effect

Mark Carney face on 20GBP note
Too soon? Or not soon enough?

Last week, on the 4th of July, Mark Carney made his 1st move as Bank of England governor. While the BoE did not move on monetary policy, it was Carney’s introduction of forward guidance that sent sterling tumbling across the board. Under the Carney effect, GBP has been unable to recover as the fundamentals have completed shifted in a very unexpected manner. Many market participants expected Carney to wait until next month to bring any changes to monetary policy. Carney’s big surprise  should bring sterling to new lows across the board during this 2nd half of the year. The Carney effect will only be exasperated by poor economic data as we saw today and merely slowed, not reversed, by any upside surprises in data.

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