There was a small boost this morning after the Government announced they would build a third runway at Heathrow. The current investment in domestic infrastructure could help the UK battle through some of the uncertainty surrounding the Brexit. Major projects should help the UK’s profitability whilst providing jobs and investment in local areas. Sterling could certainly start to benefit from these projects, especially with HS2 getting underway.
Draghi and Carney Volatility
This afternoon Bank of England Governor Mark Carney and European Central Bank President Mario Draghi will speak within an hour of each other. The two major influencers of the currency market are both fairly notorious for causing Sterling to weaken, especially Draghi.
The ECB President has an uncanny ability to cause the Euro to gain a cent on the Pound and I don’t think today will eb an exception.
The speeches will almost certainly provide an insight into what to expect in the near future however there is unlikely to be any data. Draghi has been speaking about the Eurozone’s Bond Buying Program over the last few weeks, with the point of completion coming under question. What does seem to be the case is that the current program won’t finish before the end of March next year as planned. Rather than this been as negative, investors treat Draghi’s word as positive and attempting to fix the current economic issues, this in turn causes the GBP/EUR rate to fall.
Mark Carney is likely to mention the current increase in the inflation levels in the UK and that he believes this is set to continue. He may also bring up that inflation can cause real-term growth to decrease as the price of goods increase faster than wages, in turn causing a pinch for consumers. I would not be surprised to see the GBP/EUR rate drop after both of these speeches.