Pound at Risk as BOE Governor Carney Talks Down Rate Hikes

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TALKING POINTS – POUND, CARNEY, BOE, US DOLLAR, ISM, AUSSIE DOLLAR, RBA

British Pound vulnerable as BOE’s Carney talks down rate hike prospects
US Dollar may retrace some recent gains on soft manufacturing ISM data
Australian Dollar gains on RBA rhetoric but follow-through seems unlikely

The British Pound remains in focus following a rocky start to the trading week as BOE Governor Mark Carney and a contingent of central bank officials testify before Parliament’s Treasury Committee. Rhetoric echoing the latest Quarterly Inflation Report suggesting Brexit-related worries will mean a slow rate hike path despite improving economic fundamentals may pressure the UK unit further.

Later in the day, the spotlight turns to Augusts’ US manufacturing ISM survey, where a bit of a slowdown in factory-sector activity growth is projected. A downside surprise echoing recent deterioration in US data outcomes relative to forecasts may cool Fed rate hike bets and push the US Dollar lower. An otherwise broadly supportive landscape means this is unlikely to be no more than a brief retracement however.

The Australian Dollar edged up a bit in otherwise quiet Asia Pacific trade after the RBA offered a bit of supportive commentary alongside a decision to keep the benchmark cash rate unchanged at 1.5 percent, as widely expected. Still, the priced-in outlook doesn’t envision a hike at least until September next year. In fact, the probability of seeing an increase before 2020 is barely better than even at 58.3 percent.

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