Pound Sterling (GBP) Needs Sledgehammer ? Bank of England Chief Economist Haldane

July 15, 2016 - Written by James Fuller

STORY LINK Pound Sterling (GBP) Needs Sledgehammer ? Bank of England Chief Economist Haldane

The Pound has failed to make much of a recovery at the end of the week, with Andy Haldane's extremely dovish comments on the UK interest rate continuing to concern investors.

Pound Sterling Exchange Rate Sheds Gains Following BoE Comments

Comments contained in a set piece speech from Bank of England (BoE) Chief Economist Andy Haldane earlier today threaten to weigh down the Pound Sterling (currency : GBP) in the lead-up to next month’s monetary policy announcement.

The minutes which accompanied the minutes of the Bank’s policy meeting, published yesterday, contained strong signals that action will be taken by the UK’s policymakers to ward off a domestic recession at their next meeting which takes place on 4th August. The memos noted that,

‘most members of the Committee expect monetary policy to be loosened in August. The precise size and nature of any stimulatory measures will be determined during the August forecast and Inflation Report round.’

BoE Stimulus Forecast, GBP Could Drop Vs EUR, USD

However, Haldane went further today, stating that easing should be, ‘delivered promptly as well as muscularly’. Haldane went on to draw comparisons with the predicament faced by the UK central bank and that confronted by a famous fictional character, stating that he,

‘would rather run the risk of taking a sledgehammer to crack a nut than taking a miniature rock hammer to tunnel my way out of prison - like another Andy, the one in the Shawshank Redemption.’

Haldane rounded up his analogy by emphasising the time-sensitivity of the Bank’s situation, observing that, ‘Andy did eventually escape. But it did take him 20 years. The MPC does not have that same luxury.’

US Retail Sales Data Sends US Dollar (USD) Exchange Rate Higher

Elsewhere, this morning’s stronger than anticipated Advance Retail Sales data from the US has re-ignited investors’ expectations regarding an in increase in the cost of borrowing Stateside before the turn of the year. The showing of 0.6% was far ahead of the anticipated 0.1% result, but the positive effect on the US Dollar (currency : USD) was mitigated by a lower than expected print for June’s annualised US Consumer Price Index data. The upshot has seen the GBP USD exchange rate trade down by just over a quarter of a percentage point on the session.

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