Thursday, June 12, 2014

BoE governor Carney: Rate rises sooner that the market expects | GBP stops triggered

Photo credit: The Guardian

Normally, we expect to find Forex fireworks late at night in GMT terms in Oz or NZ, or occasionally in China or Japan. But last night this happened only a few hundred miles from where we live, in London.

The occasion was the London Lord Mayor’s banquet in the Mansion House, which is often used as an occasion for UK politicians to give advance notice of new legislation that might be under consideration.

The Chancellor of the Exchequer had already let it be known that the government was set to introduce so-called macroeconomic measures to curb mortgage lending on high loan-to-value house purchases. These have already been put in place, with some success, in New Zealand and other countries across the globe.

Then Bank of England governor Mark Carney dropped his bombshell. He said that the Central Bank would instigate interest rate rises “… sooner than the  markets expected”.

Stops triggered

This had the immediate effect of spurring the Pound Sterling to rise across the board, against all counterparts. GBPUSD took off, as in the chart above. The rate against the Euro, EURGBP, dived, as the pound is the second currency in that pair, the quote currency.

All this is good for our positions in GBPUSD and EURUSD. Now the Mandelbrot routine has also kicked in with a position in GBPCAD, on the long side.

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