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Pound to US Dollar Exchange Rate Drops as Carney Warns of Exporter Losses


Sterling experienced a reversal of fortunes during European trading as Bank of England Governor Mark Carney warned that the Pound’s recent strength could hamper the UK’s trade prospects.

The Pound eased away from a two and a half year high as the BoE chief talked down the currency during a speech in Davos Switzerland.

Carney also restated the central bank’s commitment to keeping interest rates at record lows for as long as necessary.

The Pound consequently shed 0.7 per cent against its US counterpart.

As currency strategist Peter Kinsella observed; ‘Carney rocked the apple cart by stating that the BOE did not need to hike rates and as such the pound has sold off. One has to expect more jawboning and verbal interventions from the BOE, because it’s the only thing they can do to talk down the pound. Whether they are successful over the longer term is a different matter. People betting on a decline in the pound are going to be proven wrong, again, as they were last year.’

Sterling also extended declines against the Euro.

In other currency news, the Canadian Dollar fluctuated against the ‘Greenback’ and Pound following the release of Canadian inflation data.

Given that inflation concerns could prompt the Bank of Canada to introduce a further rate cut today’s report was of particular interest.

The report showed that the inflation rate climbed by 1.2 per cent in December, year on year, up from November’s 0.9 per cent pace. The result was slightly lower than forecast.

The core consumer price index increased by 1.3 per cent, in line with estimates.

The figures prompted this response from macro strategist David Tulk; ‘The longer term trend is the Bank of Canada is going to stay quite dovish; they are concerned about inflation. That’s the story for this year, to see still diminished price pressures.’

Sterling could recover some ground against the ‘Buck’ before the close of North American trading, but the currency is likely to largely retain declines over the weekend.