Another deliberate own-goal from the governor

28 Mar

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A chap in Brighton has been going round shops and other businesses asking if he can borrow their vacuum cleaners because, he says, his own has broken. Having “borrowed” the machine he disappears and neither he nor the hoover was ever seen again. Since the thief began his campaign three months ago he has cleaned up and people at 16 businesses have been sucked in.

Sterling suffered a very different fate yesterday when it was spat out by investors as Bank of England Governor Sir Mervyn King delivered his penultimate quarterly Inflation Report. None of what he said should have come as a surprise to the market: Persistently above-target inflation, wages failing to keep pace with prices, painfully slow economic growth, the limits to a central bank’s ability to counteract non-market influences such as university tuition fees; these do not constitute news and everybody knows the UK economy faces “big challenges”.

But when the story was told by a po-faced governor investors were left in no doubt as to their responsibility and they dutifully sold the pound. It moved sharply lower across the board, dropping more than a cent against the US dollar and the euro even before Sir Mervyn had finished speaking. On the day sterling is down by 1% or thereabouts against the yen, the US, Canadian and Australian dollars, the euro and the Swiss franc.

And the declines are all the handiwork of the governor. In many ways it is a shame, as the world is drawn inexorably towards a global currency war, that Britain will soon be losing the services of the greatest currency-depressor of his generation.

Sterling was not the only story on Wednesday but it was by far the most high-profile one. Nobody outside Scandinavia really noticed when the Swedish krona hit a 21-year high against the pound and a record high against the US dollar. It jumped after the Rikbank left its benchmark interest rate unchanged at 1% and Governor Stefan Ingves said of his currency’s high value: “We’re happy with the level we’re seeing now. It’s a level that I think will last.”

The SEK was the best performer over the 24 hours, strengthening by 2% against sterling, but the New Zealand dollar was not far behind. The Kiwi got a leg up from the Business NZ purchasing managers’ index, which rose by five points to 55.2.

As Thursday dawned in Europe the pound appeared to be in relatively better shape, at least against the euro in currency exchange. Japan set the tone, reporting a provisional -0.1% contraction in gross domestic product (GDP) during the fourth quarter of 2012. France went one better, with a -0.3% contraction, and Germany outdid both of them as its economy shrank by -0.6%. All three were worse than expected and next to the two European figures Britain’s -0.3% contraction does not look so bad. Later this morning the data from Italy, Portugal and pan-Euroland are all forecast to be negative too.

There is little else on the agenda though. Greece’s unemployment rate will be uncomfortably above a quarter and weekly US jobless claims are unlikely to make any difference to the dollar. New Zealand retail sales for Q4 come out tonight.

Sterling’s best hope today is that further disappointing Euroland GDP figures will relieve the downward pressure on GBP/EUR. If not, investors might still be in a selling mood and not in a mood to send money online.

5 Responses to “Another deliberate own-goal from the governor”

  1. Hana February 26, 2013 at 1:57 pm #


  2. Filiberto February 27, 2013 at 8:17 am #

    Lately,I been getting these Banking e-mail in my Spam email as well in my regular email

    here’s the letter:
    Dear Sir,


    Hope you are fine and ok and your family is doing pretty good right? We have series of meetings with Mr. Mervyn Allister King, the Executive Governor, Bank of England.
    We come to final conclusions of getting your account upgraded and getting the funds ready to be use for you that means after you’re successfully pay the complete fees for upgrading which is still your fund and will be added to your total amount ($36,000,000.00) thirty six million united states dollars only.

    My advice for you now is for you to get the fees for upgrading of your new open account with Butterfield Private Bank. so we are now waiting for the fees so that we can be able to complete the upgrading of your account with my bank and then lodge in the full amount of ($36,000,000.00) thirty six million united states dollars into your account and issue the chequebook and Master Gold Credit cards on your behalf and then forward the details to you with all the original supportive document to you and send it to you via UPS overnight mails to your address, so please provide your phone number and your address so that we will prepare the documents and lodging of the full amount ($36,000,000.00) thirty six million united states dollars into your already opened new account with Butterfield Private Bank with special arrangement from the boards of directors of Buttterfield Private Bank.

    Incase if you don’t have our fiduciary agent Bank account which you we have already sent to you in our previous communication with you, please feel free to contact me so that I will reconfirm the fiduciary agent bank account to you in United States who win the contract to handle the fiduciary arrangement between we and you.

    We anticipate your urgent response and comments and incase you have any questions please feel free to ask me so that I will clear you on the points where you want me to clear you without any further delay.


    Mr. Andrew Frey

    Note: Mr. Mervyn Allister King, told our boards of directors that they plan to assist you in investing part of your fund about ($16,000,000.00) on your behalf into their investment programs and we wish to advise you that such investment programs is good because it yield lots of interest and your money is safe with the bank as far as the Executive Governor of Bank of England is involved, please let us know once this arrangement is concluded so that we will give you our own professional advise over the investment programs, meanwhile we are waiting for the fees to upgrade your account before we lodge into your account the ($36,000,000.00) thirty six million united states dollars into your new account with Butterfield Private Bank and then you are automatically qualify to operate your account with my bank yourself.

    I don’t have any bank account nor any money. Can someone help me? where can I report this?

  3. Teri March 2, 2013 at 12:17 am #

    Ok I’m 17 from the UK and still in the education system, I’m going to get a job part time.
    But there is just one thing that is winding me up! All the stupid leeches on the dole!
    Soon they will be claiming my earnings from the taxes I pay! ANNOYING RIGHT?

    Also I know this girl she is 20 and already has 2 kids, she is unemployed and clams benefits, she gets the rent payed, dole money, child benefits, and they even spend money for resources to find her a job!
    She can afford anything she likes, including a plasma tv, 2 nintendo ds’s, takeaways, alcohol, cigarettes and even gets the full Sky Digital cable TV package!
    I estimate this costs the government atleast £11,000 a year for just her, probably much more, and theres 3million unemployed in the country and I bet more then half sponge it and don’t want work!

    My mother is a single parent with a respectable job, she try’s her best, but we will always be worse off than the unemployed, that’s why I want to help with a part time job!

    All Im asking is if people feel the same as I do?,
    Im only 17 and I have already found hatred for the people who sponge the benefit system!
    I know now that I will never go down that path!

  4. Hui March 11, 2013 at 5:16 am #

    Some countries are getting better. but when do you think the world as a whole will recover?

  5. Vida March 13, 2013 at 1:58 pm #

    Do you know anything interesting or unusual about Wolverhampton?
    I’m compiling an interesting facts/trivia piece on Wolverhampton and would appreciate any facts you would like to share.
    Example: Wolverhampton was the first place in the UK to have a set of electrically operated traffic lights.

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