Sterling Steadies Thanks To Comments From BoE?s Weale

Published: Friday, 1 February 2013 09:00 BST - Written by David Woodsmith

STORY LINK Sterling Steadies Thanks To Comments From BoE?s Weale

Today’s session brings the release of this month’s, and any month’s, most eagerly awaited data release. This afternoon’s Non-Farm Payroll release in the US will be particularly closely-watched following Wednesday’s highly disappointing US growth data for quarter 4. The key US jobs print is expected to show that some 155,000 new positions have been generated in the world’s leading economy last month. Anything less than this number, and institutional investors are likely to develop a severe attack of the jitters regarding the state of America’s economy. Such an outcome will almost certainly lead to a flight to quality which would see the safe-haven US Dollar well-supported.

Yesterday’s session provided evidence that, even before today’s vital American labour market publication, global investors were losing their appetite for risk. London’s benchmark FTSE 100 share index closed down by 0.73%, while North American indices spend a large part of the day trading into the red.

Elsewhere, comments by future Bank of England Governor Mark Carney at the Davos Economic Forum earlier in the month, suggested that stringent inflation targets should not be the sole economic indicator used by central banks to formulate their monetary policies. Carney suggested that growth and/or employment goals could and should be used as an alternative. Economic participants took this as a tacit revelation that Carney favours further loosening of monetary policy for the UK economy, (which is likely to fan Britain’s inflationary flames).

However, talk of more QE, or perhaps even a surprise cut in base rate, for the British economy when Carney takes over the top job at Threadneedle Street in mid-2013, was dampened yesterday by comments made by current bank of England MPC member Martin Weale, who stated that on balance, using a growth-based target to determine British monetary policy was a bad idea. Weale’s words provided a rare chink of light for Sterling in what has otherwise been a grim start to 2013.

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