Comments by Andrew Bailey perked up the pound yesterday morning, following a drop in value on Friday. The Bank of England (BoE) governor displayed cautious optimism, saying he was “more positive” about an economic recovery, although it came with a “large dose of caution.” Speaking on BBC’s Today programme, Mr Bailey outlined a more “balanced” view than the BoE’s chief economist Andy Haldane, who claimed the economy could rebound like a “coiled spring” this year.
The governor also told the BBC he was exploring “new tools” to deal with the economic fallout of the pandemic, which could include negative interest rates.
UK house prices rose by 0.8% this month, creating the strongest spring sellers’ market in 10 years as buyer demand surges, according to Rightmove’s latest House Price Index. The average price of houses coming to the market has increased by £2,484. The recent extension of the stamp duty holiday by chancellor Rishi Sunak seems to have contributed to a spike in buyer action.
However, overnight the pound to dollar rate sunk below the 1.39 benchmark, as the US currency continued to firm.
Dollar Holds Firm Ahead of Fed Meeting
US Treasury yields fell yesterday morning, but the benchmark 10-year figure remained above the 1.6% mark ahead of the Federal Reserve’s meeting this week – lending the dollar further support. The Federal Open Market Committee is scheduled to meet on Tuesday and Wednesday, with the central bank expected to forecast better economic growth following the signing of the $1.9 trillion fiscal relief package into law last week.
Business conditions for New York manufacturers improved more than expected in March, according to a survey released yesterday. The Federal Reserve Bank of New York’s Empire State Index rose to 17.4 from 12.1 in February – its highest level since last summer. Not only did this exceed expectations for a reading of 14.5; it was the ninth consecutive positive reading.
Over in the US, retail sales figures are expected to show that the pandemic has forced consumers to tighten their purse strings.
The UK economic calendar is empty until Thursday when the BoE publishes its latest meeting minutes, alongside its interest rate decision. The BoE’s nine-member monetary policy committee is expected to leave interest rates unchanged at 0.1%.
With the Covid ravaged US economy set to benefit from a huge injection of fiscal support, the Federal Reserve’s easy policies will take centre stage tomorrow when chair Jerome Powell speaks after its two-day meeting – the Fed is also expected to hold its cost of borrowing at 0.1%.
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