Wednesday’s
movements on the pound were largely due to Mark Carney speaking in London. The
Bank of England Governor had been expected to talk about the forward guidance
that the bank have implemented; linking the unemployment rate to the base
interest rate in the UK. He didn’t disappoint.

Wednesday’s
movements on the pound were largely due to Mark Carney speaking in London. The
Bank of England Governor had been expected to talk about the forward guidance
that the bank have implemented; linking the unemployment rate to the base
interest rate in the UK. He didn’t disappoint.

Carney was
quick to make one point very clear. Stating that the bank needs to see the
unemployment rate fall from 7.8% to 7.0% before looking at increasing the
interest rate (something the bank forecast in three years) will not be a simple
‘trigger’ and that continued economic growth will be closely monitored to
ensure that any rate increases will not be damaging to the recovering economy.

The second
point Carney made was that he is increasing the amount of money that will be
available for banks to lend by reducing the amount of capital the country’s
banks need to hold on deposit with the bank as a safeguard. He went on to say
that this is possible as the risks facing the banks have decreased sufficiently
to allow such a move. Lending in the UK is estimated to receive (or at least
have access to) an additional £90bn.

These moves
by Carney bolstered the pound’s position as investor’s pounced on the positive
steps taken by the bank to improve the credit situation in the UK. The decision
on interest rates will now appear to be a waiting game. If the 7% unemployment
rate is met within the bank’s forecasted timescale, will Carney implement any
of the caveats to hold off on a rate increase?

The Syrian
crisis has escalated further with President Obama stating that he believes the
government in Syria were directly responsible for the chemical attacks on the
Syrian people. In the UK Parliament are due to vote on what action ‘in
principle’ should be taken. All of this news comes before the United Nations
inspectors have completed their report from the ground. It is looking more and
more likely that international intervention is a question of when rather than
if.

A busy day
in the calendar for Europe and the US as employment data and inflation figures
from Germany are published. These figures will not only have potential economic
repercussions for Germany and Europe but as elections draw closer in Germany;
the data (depending on the outcome) could be used as leverage in the upcoming
elections.  The overall unemployment rate is expected to remain the same
at 6.8% with inflation expected to fall from 1.9% to 1.7%. This data could once
again highlight a further improvement in the Eurozone.

The US will
also post its revised Q2 GDP figures today that are expected to rise to 2.2%. Initial jobless claims are expected to fall by four
thousand.