The Bank of England and the ECB regularly began to help each other about a difficult matter, which is the collapse of their national currencies, respectively. This time the Bank of England showed itself, as the Bank of England Governor Jonathan Haskel stated during his speech that if the economic situation worsens, there is no need to raise the refinancing rate. Such words were taken literally as a recognition that the Bank of England should not wait for tightening of monetary policy in the near future, as the pace of UK economic growth is slowing down. Also, the Bank of England representative said that in the event of problems in financial markets, the regulator could renew the quantitative easing program. Also, this only applies to the pound because it's easy to draw comparison with the ECB. The Bank of England is forced to respond according to the conditions of a serious dependence of the British economy on what is happening in continental Europe. If the Bank of England representatives make such statements, as Jonathan Haskel did, then it was obviously done with an eye to the actions of the ECB. So many investors have made for themselves a simple conclusion and that the ECB will continue to extend the quantitative easing program. Hence, it is not surprising that the single European currency has confidently moved down.
The funny thing is that there were no other reasons for the weakening of the single European currency. On the contrary, the data of S&P / Case Shiller on US house prices showed a slowdown in their growth rates from 6.7% to 6.6%. Moreover, the previous data were revised downwards from 6.8% to 6.7%. And a similar result was quite expected on the background of a significant increase in the US home sales.
Today, the consumer lending data in Europe will come out and its growth rates can accelerate from 2.9% to 3.0%. The potential growth of the single European currency is further strengthened by expectations about US statistics, which are not so positive. In particular, commodity stocks in warehouses of wholesale trade can grow by another 0.2%, which means that stocks have been growing for seven months in a row. Also, durable goods orders should be reduced by 1.0%, since it was declining for two months in a row by which the US statistics are expected to be extremely weak. However, Mark Carney will have his speech today, and the head of the Bank of England may well enhance the negative effect caused by the words of his colleague.
If the head of the Bank of England does not make harsh statements, then the single European currency may increase well in price to 1.1725. However, when Mark Carney confirms the words of Jonathan Haskel, then the single European currency will continue to move to 1.1575.
* The presented market analysis is informative and does not constitute a guide to the transaction.