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Hardy: Why cable could continue to fall
The UK's strengthening economy has demonstrated that the recovery is "finally taking hold". Today the Bank of England stated that Britain’s unemployment rate is falling much faster than previously forecast.
Expectations were for unemployment rates to drop to 7 percent after a period of several years. With the current unemployment rate at 7.6 percent for Q3 the Bank of England is now stating that unemployment could hit the 7 percent target as early as October of 2015.
BOE Governor Mark Carney commented on the country’s economic recovery after the bank’s report stating that, “For the first time in a long time you don't have to be an optimist to see the glass is half full."
Carney lowered interest rates to a record low of 0.5 percent in August, with the mindset that the rate would hold until a 7 percent unemployment rate was achieved. Interest rates are not set to rise anytime soon though.
John Hardy, Head of FX Strategy at Saxo Bank, claimed that “there is no need to worry about interest rates if inflation is so low.” Both the MPC and Carney reiterated this sentiment stating that interest rates are not set to increase anytime soon regardless of the fact that the country may achieve 7 percent unemployment within the next year.
After the Bank of England’s announcement sterling’s price saw an increase. Hardy stated that structural issues are still present for the currency, which is being driven by consumption. Possible support stems from the fact that banks around the world hold a more dovish perspective while the Bank of England remains neutral.
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