Pound Weakens As BoE Carney Cautions Over Further Rate Hikes

Pound Weakens As BoE Carney Cautions Over Further Rate Hikes

The pound slipped against its major opponents in the European session on Thursday, after the Bank of England Governor Mark Carney cautioned over further rate hikes given Brexit uncertainty.

In his press conference, Carney said that further hikes would be gradual and limited, as domestic factors arising from Brexit uncertainty and fiscal drag will dissipate slowly.

Policy needs to walk, not run, to stand still, he told.

«If there is a major shift as a consequence of the Brexit negotiations, that is disinflationary, or creates a very extreme trade-off, such as the one we saw post-referendum, then that could have consequences for monetary policy.»

«There's a wide range of Brexit outcomes, but in many of them, interest rates will be at least as high as they are today. So we don't need to keep our powder dry for that,» he added.

Market participants are now pricing in another rate hike only in late 2019 or early 2020.

The currency erased its BoE-led gains following Carney's speech.

The pound declined to near a 2-week low of 1.3016 against the greenback, from a high of 1.3129 hit at 7:15 pm ET. The next likely support for the pound is seen around the 1.29 level.

Data from the Labor Department showed that first-time claims for U.S. unemployment benefits edged slightly higher in the week ended July 28.

The report said initial jobless claims inched up to 218,000, an uptick of 1,000 from the previous week's unrevised level of 217,000. Economists had expected jobless claims to rise to 220,000.

The pound hit a 5-month low of 1.2941 against the franc, reversing from a 3-day high of 1.3040 touched at 7:00 am ET. The pound is seen finding support around the 1.28 level.

Survey data from the State Secretariat for Economic Affairs showed that Switzerland's consumer confidence weakened to the lowest level in more than a year in July.

The consumer sentiment index plunged to -7 in July from +2 a quarter ago. The score was expected to remain unchanged at 2. This was the lowest reading since April 2017.

After rising to 146.66 against the yen at 5:30 pm ET, the pound reversed direction and declined to near a 5-week low of 145.01. On the downside, 144.00 is possibly seen as the next support level for the pound.

Data from the Bank of Japan showed that Japan's monetary base rose 7.0 percent on year in July, coming in at 497.639 trillion yen.

That follows the 7.4 percent jump in June.

The pound slipped to a 2-day low of 0.8925 against the euro, off more than a 2-week high of 0.8855 hit at 7:05 am ET. If the pound drops further, 0.91 is likely seen as its next support level.

Figures from Eurostat showed that Eurozone producer prices climbed at a faster pace on energy prices in June.

Producer prices advanced 3.6 percent annually in June, faster than the 3 percent rise in May. This was also faster than the expected 3.5 percent.

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