Here we go again.
One week after the pound surged following the BOE's unexpectedly hawkish 5-3 vote split, then tumbled after Mark Carney's speech yesterday which suggested no rate hike is coming any time soon, today, for the third time in almost as many days, all GBPUSD stops were taken out after BoE Chief Economist, Andy Haldane, surprised the market with unexpectedly hawkish comments in his speech in Yorkshire. He said he was leaning toward joining the hawks on the Monetary Policy Committee and considered a vote for a rate increase as early as June. He also said he favors withdrawing some of the August 2016 stimulus in the second half, and that the partial withdrawal of additional stimulus put in place last year would be “prudent relatively soon, provided the data come in broadly as expected in the period ahead.”
He said that the balance of risks between tightening policy too early and too late has “swung materially towards the latter in the past six to nine months” and that tightening is likely needed “‘well ahead of current market expectations” and that a late decision to raise interest rates “could result in a much steeper path of rate rises later on”.
He also suggested that he may even have voted in favour at the last meeting in June when MPC voted 5-3 to leave rates at record low.
As Citi notes, this is uncharacteristically hawkish from Haldane, and appears to contradict much of Carney’s dovishness from yesterday, or as Citi notes, "Maybe Haldane is the new Forbes?"
In any case, with cable in dire need of some good headlines - and FX traders in dire need of a stop hunt - Haldane has been quite the welcome catalyst. GBPUSD is back up to 1.2688, and EURGBP has erased today’s gains and is now at 0.87895.