Central banks in focus

Carney stay or not?

Central banks are the hot topic of the moment. In most cases the focus is on their benchmark interest rates and where they might be going. In one particular instance it is on the governor and where he might - or might not - be going.

Last Thursday Sweden's Riksbank and the Norges Bank in Oslo kept their policy rates unchanged at -0.5% and +0.5% respectively. Norway's krone came out of it best, not least because plus 0.5% looks so much more attractive than minus 0.5%. The Swedish krona took a dive, becoming the day's weakest performer, when Riksbank said it would not be increasing its rate until 2018. Four more rate announcement are due this week.

There has been considerable speculation over the weekend about the future of Mark Carney at the Bank of England. The eight-year contract he signed in 2013 includes an option for him to leave after five. He may be tempted to exercise it following the tongue-lashing he has received from politicians, some of whom accuse him of being anti-Brexit. The Times thinks he will leave in 2018. The Financial Times says he won't. Mr Carney is expected to clear the air on Thursday: an announcement of his early departure would probably be unhelpful to sterling.


One of the arguments against Mr Carney is that the bank underestimated Britain's economic performance in the third quarter but so did many other economists. Ahead of last Thursday's data the forecast was for a 0.3% quarterly expansion. In the event, the figure came in at 0.5%.

The data were not as helpful to sterling as might have been expected, principally because manufacturing was down by -1% on the quarter despite the boost it should have gained from sterling's weakness. The pound starts today an average of -0.3% below Thursday's starting point. It has lost a cent each to the euro and the Swiss franc.

America's gross domestic product also expanded by more than expected in Q3. Annualised growth of 2.9% equates to a quarterly expansion of 0.7%. The news did not do much for the dollar though. It lost two thirds of a cent to the euro and even failed - albeit it only narrowly - to keep pace with the pound.

Coming up

A busy week lies ahead. It began with industrial production and retail sales data from Japan, both of which were unchanged on the month in September. The third quarter GDP figures from Euroland come out before lunch, together with the inflation numbers.

After expanding by 0.3% in the second quarter euro zone GDP is forecast to have grown at the same pace in Q3. The headline inflation rate is pencilled in at 0.5%. There are money supply and mortgage approval figures from the UK this morning and personal income and spending data from the States after lunch.

Early tomorrow the Bank of Japan and the Reserve Bank of Australia make policy announcements