Chairperson of an advanced countries' central banks might be much more important than president of a small country. In forex market, they are infinitely more powerful; central banks' governors statements has high impact on the direction of price movements. As is the case with Janet Yellen of US the Fed and Mark Carney of the Bank of England.

Chairperson of an advanced countries' central bank might be much more important than president of a small country. In forex market, they are infinitely more powerful; central banks' governors statements has high impact on the direction of price movements. As is the case with Janet Yellen of US the Fed and Mark Carney of the Bank of England.
questioningYellen's Testimony
Earlier this month, Janet Yellen officially replaced Ben Bernanke as US the Fed's governor. Yellen is known as a Keynesian with dovish tendencies. Dovish means that she focuses more on resolving unemployment than raising interest rates. In congressional hearing last November, she spesifically mentioned the problem of unemployment, while emphasized her belief that the Fed policies so far has been on the right track in leading US economy toward recovery. It implied her aversion on the topic of increasing interest rates (note that high interest may negatively affecting job market), as well as demonstrating her commitment to continue what has been pioneered by Bernanke (that is, tapering).
janetIn her testimonial last week, the first female head of the Fed once again asserted her views on future monetary policy. She will closely observing job market and inflation, and keep super low interest rates (0.25%) until unemployment fell far below 6.5%. Whereas previously Bernanke was willing to consider an increase if unemployment fell to 6.5%. As to tapering, she said that The Fed will shifts its policy only if there are serious signs of extremely low inflation (under 2% a year), or if there are significant slumps on economic outlook.

Yellen's testimony didn't create any big wave at the time (11/2), but her statement in regard of tapering might be the main reason why Dollar fell since last week against most of its main rivals. Disappointing US economic reports, especially retail sales and jobless claim reports, have planted a question on whether the Fed will slow the pace of Tapering. To answer any lingering doubts, the market relies on the release of FOMC meeting minutes and CPI reports next Thursday. Any surprises could mean reversals on the direction of USD this month, or contrarily, plunge it further.

Carney's Pledge
Another dovish governor is Mark Carney of the Bank of England. In order to support UK economic recovery, he's been keeping low rate at 0.5% and launching Funding for Lending scheme. He also indicated that BoE will consider raising key rate if unemployment fall to 7.0%. This might be the reason why GBP crawled higher after quarterly inflation report last week. In the report, BoE upped economic growth projection from 2.8% to 3.4% and estimated unemployment to touch 7.0% treshold on spring this year. The market applauded it because it means that an interest decision is within sight.   
markBut now, it seemed BoE throw the treshold away. In an interview on BBC yesterday (17/2), Carney underlined his pledge to hold low rate for some time. Any shifts on the policy will be limited and gradual, and will not occur before the economy truly become stronger. The problem is, despite of seemingly good economic reports, UK economic drive hasn't fully recovered. He said, “What we haven’t seen yet is business investment picking up and we certainly haven’t really seen net exports recovering.” Moreover, economic slumps will persist and consumer prices won't reach BoE's goal if the key rates is raised to 2% during the next three years.

In another word, don't wish for an interest rate hike in the near future. Especially if what some analysts said about UK labor market contraction for the next few months come true. Is this mean GBP rally ended? Well, it's up to UK CPI and unemployment reports on Tuesday and Wednesday. GBP long-term outlook remains bullish, but we can expect profitable shorts here and there.

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