With news that Governor Mark Carney will remain with the Bank of England until 2019, the British Pound firms somewhat but analysts fear that the currency may still struggle to make a meaningful recovery.
After Mark Carney, the respected Bank of England Governor, announced that he would remain in the position until at least June 2019, the Pound rose as the market responded to the announcement positively. There were concerns before the announcement that he would leave his job due to a few politicians’ labelling him as pro-EU and other possible personal reasons.
In a statement that Carney made, he was honoured to extend his term in office by an additional year over and above the period laid out in the Article 50 process. He believes that this extension will help make the transition with the new UK-Europe relationship easier, helping to secure UK’s position in the future.
He continued to thank the Prime Minister and his colleagues at the Bank of England for allowing him to continue with his important role. Carney said that he aims to further promote the British people in this important time in the country’s history. Prime Minister Theresa May spoke in favour of Carney’s extended term in office to complete his full eight year term, which saw the Pound Sterling bid higher earlier in the day.
This move by May settled concerns of her frustration with Carney and the apparent direction he was taking the economy. In particular, the damage that Carney was doing to savers in England. With May backing the decisions that Carney has made and continues to make, tensions have settled and the markets have responded positively.
Helen Bower, a spokesperson for May confirmed her approval by saying that May supports Carney’s decisions that only he can make being in the position he is in. Bower went on to say that the Prime Minister would be supportive of Carney staying on longer than five years.
May’s support of Carney comes a week after Chancellor Philip Hammond expressed his support of Carney’s decisions as the Bank of England Governor. Hammond made it clear that he would not stand against any decision made by Carney and his efforts to expand the asset purchase programme. After the announcement by Carney, Hammond said that he was pleased to hear that Carney would remain at his post until June 2019 and that he believed this would allow for effective leadership at the Bank of England, especially during this crucial time after Brexit and the negotiations that follow.
Hammond said that recently the uncertainty of Mark Carney’s office created fears about the potential undermining of the Pound Sterling. He continued saying that it furthered the doubt about the GDP as there were fears about Carney losing the support of the government and possibly leaving for personal reasons. Hammond said that he believes the steady guidance of Carney at the helm of the Bank of England and the UK financial system is a redeeming feature of UK’s leadership post-Brexit. He said that the stability and credibility that Carney provides is going to be the key to a stable future and transition after Brexit.
Hammond continued saying that if Carney had left, the questions and uncertainty about who would replace him would further add to the questions and concerns of the Sterling post-Brexit. The chairman at Willet Advisors, Steve Rattner, said that the uncertainty of Carney’s tenure created some of the biggest risk for the week in the global exchange markets. Now that it has been settled, the Sterling has gained confidence in the markets according to Rattner. Rattner also said that Carney can be compared to Draghi, Ben Bernanke, and Janet Yellen and his presence as the head of the Bank of England is good because of how capable Carney is in his post, especially during these turbulent times.
Although the news has helped to firm the Sterling, analysts such as Kit Juckes believe that the British Pound will carry on trading with a soft bias. He said that it will be up to the data that comes out in the near future and if data from PMIS among others is weak, then the Pound will continue to struggle.