Carney changes its mind, GBP soars - BBH

Analysts from Brown Brother Harriman, point out that Bank of England Governor Carney changed its mind without fresh economic data and they warn about a reversal in EUR/GBP. 

Key Quotes: 

“It is not that central bankers cannot change their minds. It is that Carney did so without warning and without fresh economic data. It has only been a week since the Mansion House speech where Carney leaned against the creeping hawkishness of some of the MPC.”

“Sterling is rising for the sixth consecutive session against the US dollar.  It dipped below $1.26 a week ago and moved today to challenge $1.30 (high so far ~$1.2970).  The euro is posting a key reversal lower against sterling. It made a new high since last November earlier and now is below yesterday's low.  A close below GBP0.8780 would confirm the reversal pattern.”

“Carney indicated he would look at three factors to determine his rate stance:  extent that weaker consumption is offset by other parts of the economy, such as investment; wages and unit labor costs; and how the economy reacts to the Brexit.  While these sound important, it reveals very little about what will be decided in at the August 3 MPC meeting.”

“In the sharp market reaction, the shift in SONIA suggest the first BOE hike has been brought forward to May 2018, in from August at the start of the week and early 2019 a week ago.”