Pound Extends Decline On BoE Easing Speculation

01:24, 1st July 2016

(RTTNews) - The pound extended yesterday's decline against its major rivals in early European deals on Friday, after the Bank of England Governor Mark Carney hinted at loosening its monetary policy "over the summer" to safeguard the economy from the fallout of the Brexit shock.

In remarks to business leaders, Carney said the deteriorating economic outlook in reaction to the so-called Brexit will likely require some monetary policy easing over the summer.

"The Committee will make an initial assessment on 14 July, and a full assessment complete with a new forecast will follow in the August Inflation Report," Carney said. "In August, we will also discuss further the range of instruments at our disposal."

In other economic news, data from Markit Economics and Chartered Institute of Procurement & Supply showed that the U.K. manufacturing sector revealed modest improvement in June, on the back of output and new order growth.

The Markit/CIPS Purchasing Managers' Index rose to 52.1 from a revised reading of 50.4 in May, its highest level since January. Economists had expected a score of 50.1.

Meanwhile, European stocks rallied as investors bet on more stimulus from central banks following the Brexit vote.

The pound has been trading in a negative territory in Asian deals, after its massive sell-off Thursday upon the BoE chief's remarks. Yesterday, the pound shed 0.5 percent against the yen, 1.3 percent against the franc, 0.88 percent against the greenback and 0.7 percent against the euro.

The pound edged down to 0.8371 against the euro, reversing from a high of 0.8316 hit at 11:45 pm ET. The next possible downside target for the pound is seen around the 0.86 zone.

Survey results from Markit showed that the recovery in the euro area manufacturing sector gathered momentum in June.

The final manufacturing Purchasing Managers' Index rose more than initially estimated to 52.8 in June from 51.5 in May. This was the fastest growth in six months. The flash score was 52.6.

Pulling away from an early high of 1.3349 against the greenback, the pound weakened to 1.3262. On the downside, the pound may locate support around the 1.30 mark.

The pound dropped to 1.2953 against the Swiss franc, compared to 1.2987 hit late New York Thursday. The pound is seen finding support around the 1.28 zone.

The pound slipped to 136.07 against the yen, down from Thursday's closing value of 137.29. If the pound-yen pair extends decline, it may test support around the 133.00 mark.

Survey results from the Cabinet Office showed that Japan's consumer confidence improved more-than-expected in June to the strongest level in five months.

The consumer confidence index rose to 41.8 in June from 40.9 in the previous month. Economists had expected the index to climb to 41.1.

Looking ahead, at 6:00 am ET, European Central Bank Chief Economist Peter Praet is expected to speak at Financial Times "Festival of Finance" in London. Later, Bank of England Chief Economist Andy Haldane will also talk about "cashless society" in the same venue.

In the New York session, final U.S. manufacturing PMI for June, construction spending data for May and U.S. Baker Hughes weekly rig count data are slated for release.

At 11:00 am ET, Federal Reserve Bank of Cleveland President Loretta Mester is expected to speak on the economic outlook and monetary policy before the European Economics Financial Centre Distinguished Speakers Seminar in London.