GBP
Yesterday Mark Carney all but ruled out an interest rate hike this year. In a
speech to the Trades Union Congress, The Bank of England governor said
inflation is lower than the Bank’s two per cent target, slack in the labour
market and downward pressure from a strong sterling meant the current inflation
environment is not yet conducive to an interest rate rise.

Carney stated that interest rates should begin to increase by the spring 2015

GBP
Yesterday Mark Carney all but ruled out an interest rate hike this year. In a
speech to the Trades Union Congress, The Bank of England governor said
inflation is lower than the Bank’s two per cent target, slack in the labour
market and downward pressure from a strong sterling meant the current inflation
environment is not yet conducive to an interest rate rise.

Carney stated that interest rates should begin to increase by the spring 2015
and thereafter rising very gradually inflation would settle at around two per
cent by the end of the forecast period and a further 1.2 million jobs would
have been created. He also explained that low wage growth has in effect, has
led to more job creation. It has not resulted in an unusually high level of
company profits.

The jitters surrounding the Scottish referendum come from polls suggesting
Scots may well vote for independence on 18 September. A YouGov poll for The
Sunday Times showed the Yes campaign ahead for the first time, while a TNS
survey found a dead heat, with 39 per cent for No and 38 for Yes. Analysts
believe future polls are sure to make more waves in the currency markets. 

With polls so close, the No campaign has turned to Gordon Brown to turn the
tide back in favour of the No campaign, and his ability to influence the
campaign may have ramifications for the pound too. 

Britain’s Trade deficit has also risen unexpectedly in July, to £10.2bn. That’s
up from £9.4bn in June and worse than most economists had forecast. Imports
rose by £1.3bn, outpacing the £500m increase in exports, dashing hopes that the
UK economy may be rebalancing. The Office of National Statistics reported that
trade in goods with non-EU countries accounted for the majority of the increase
in exports and imports in July 2014, suggesting that demand from the Eurozone
was weak.  Exports of Non EU goods jumped by 3.4% while exports to EU
countries dived by 10.7%.

Also dominating the headlines was UK industrial output, which rose more than
economists forecast in July, indicating momentum in the recovery was sustained
into the start of the third quarter.

Key Announcements:
14:45pm BST – GBP – Inflation report hearings, during these hearings the BOE
Governor and several MPC members testify on inflation and the economic outlook
before Parliament’s Treasury Committee.

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