Forex Flash: BoE´s King steps back from verbal intervention talk - BTMU

FXstreet.com (Barcelona) - Derek Halpenny, European Head of Global Markets Research at the Bank of Tokyo Mitsubishi UFJ notes that BOE Governor King spoke last night in a TV interview and backed away from recent comments that had been perceived by the market as pushing for a weaker pound.

After describing pound strength last year as “not a welcome development”, Halpenny notes that Governor King last night described the pound as “properly valued”. He said the BOE was not trying to push the pound weaker and was only focused on reaching its 2% inflation mandate. Halpenny feels that it would have been impossible for King to have said anything else but it does make sense that his comments have changed somewhat – the BOE trade-weighted pound is down 6.4% since January, a substantial correction over that time.

He feels that given the probability of higher inflation over the coming six months that will once again erode household incomes, King is unlikely to want to be associated too closely with trying to weaken the pound. He writes, “There is potential for the pound to at least stabilise over the coming months versus the dollar before weakening again later in the year as the US fundamentals improve after a temporary softening and speculation of BOE remit changes intensifies once again.”