Week in FX Europe – BoE Still Needs to Explain In Detail

Wunderkind or one hit wonder, Governor Carney at the Bank of England insisted this week that the “Old Lady” will be looking at a wide range of signals on the labor market when deciding whether to tighten policy. Carney has a tough job. Strong UK data calls into question his forward rate guidance methodology. Carney is now leading the charge on how to interpret UK metrics and how the readings can be best applied to make a change to monetary policy as the governor continues to practice his policy of transparency.

A fall in the UK’s jobless rate last summer had the market speculating that the BoE would be “forced” to raise the o/n benchmark sooner than the market had been expecting.

Under the UK forward guidance mandate, policy makers have tied future benchmark interest rates (discussions) with the unemployment rate. Carney insists that a fall in the unemployment rate to +7% from +7.7% in the three-months through August would be a signal for the BoE to assess its monetary policy stance – not “automatically changing it.”

BoE October minutes released this week show that policy makers believe that the unemployment rate will likely fall faster in H2 than originally anticipated during the summer. Under Carey’s influence, new changes within the BoE require better explanation and forward guidance, along with the sweeping changes in the liquidity rules, are two new such procedures that require that.


* USD Advance Retail Sales
* USD Consumer Confidence
* EUR German Unemployment Change
* USD Consumer Price Index
* EUR German Consumer Price Index
* USD Federal Open Market Committee Rate Decision
* USD Fed Pace of Treasury Purchases
* NZD Reserve Bank of New Zealand Rate Decision
* JPY Bank of Japan Rate Decision
* EUR Euro-Zone Consumer Price Index
* CAD Gross Domestic Product
* CNY Manufacturing PMI
* USD ISM Manufacturing

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell