• Carney keeps the faith
  • Another one joins the hawks
  • Oil takes down CAD
  • Financial services at the heart of the UK’s Brexit plan

The pound coming under pressure  after Bank of England Governor Carney struck a cautious tone in a speech at Mansion House this morning. Carney once again belied resurgent hopes that the BoE is on the verge of hiking rates after a split amongst policymakers in their most recent meeting. Three The Monetary Policy Committee members voted to hike interest rates, promoting the view among some investors that the bank was leaning towards a shift. Carney addressed this directly, saying that while different members “will understandably have different views,” ultimately his view was unchanged. As anemic wage growth and mixed signals on consumer spending and business investment continue to weigh on the outlook, “now is not yet the time to begin that adjustment.” Sterling down 0.9% against the dollar today, trading at 1.2620.

Conversely, the outlook for monetary policy in the US is picking up. Joining fellow Fed member Bill Dudley’s comments yesterday, Boston Fed President Eric Rosengren took a hawkish tone in a speech this morning. Rosengren warned that “low rates put intermediaries and economies at risk.” We see this as an indication of his support for normalizing policy. We will also hear from the Fed’s Kaplan today. If he too engages in a more hawkish tone, investors may begin to price in another rate rise before year-end; this would in turn boost the dollar.

Canadian dollar lost more than half a percent against the greenback this morning as oil fell to a seven-month low just below $43 a barrel. Libya, exempted from the production cuts agreed by the Organization of Petroleum Exporting Countries, continues to increase activity. Output in Libya surged to a four-year high as drilling reopens in some of their fields. Alongside a significant upswing amongst US producers, the outlook for oil prices continues to weigh heavy. OPEC agreed to extend their production cuts in May in an effort to curb the supply gut and stabilize the market. Wearing a brave front this morning, the UAE Energy Minister said this morning that members are not suggesting an emergency meeting. They will proceed with the agreed production cuts over the next nine months, giving them time to work. He also expects production to pick up – but his optimism hasn’t picked up much steam among investors.

Brexit concerns continue to keep pressure on the pound as we enter into day two of negotiations. UK Chancellor of the Exchequer Philip Hammond put financial services at the forefront in a speech this morning. He said that protecting the financial sector was the heart of his plan for Brexit, navigating away from the focus on immigration and jobs. In a significant departure from Prime Minister Theresa May’s rhetoric, Hammond took a more measured approach on border controls: “while we seek to manage migration, we do not seek to shut it down.” Focusing on London’s robust financial sector, Hammond stated that “fragmentation of financial services would result in poorer quality, higher-priced products for everyone concerned.” He stressed that avoiding this division would not only be a win for the UK, but for the economies of Europe.

EURUSD: Euro continues to trade lower after Hawkish comments from Fed members yesterday were chased up by further hints toward rate hikes this morning.

GBPUSD: Sterling took a hit from a cautious tone from BoE Governor Carney.

AUDUSD: Aussie dollar flat, retreating from overnight highs as commodities trade lower.

USDCAD: Canadian dollar weaker against the greenback, hit by a dip in oil prices and a broadly stronger USD.

USDJPY: Dollar extends gains, but only slightly higher against the yen as global risk whirs in the background.