Pound hits two-month low after Mark Carney gives Mansion House speech – as it happened

Graeme Wearden and Angela Monaghan (from 14.30)

from on 2017-06-20 16:46 (#2TDXB)

The Bank of England governor says Britain's economy can't handle higher borrowing costs yet, as he gives his delayed Mansion House speech

5.23pm BST

Global markets are red across the board this afternoon as lower oil prices have accelerated losses in Europe and the US.

Here is how the major indices across Europe closed:

4.36pm BST

Unison's annual conference is underway in Brighton and the squeeze on living standards is on the agenda.

We live in a kingdom dangerously divided into the haves and the have-nots. Some are living in misery and poverty - or even in extreme danger as we have seen last week.

The catastrophe at Grenfell Tower was the epitome of a tale of two cities. People living in wealth and luxury side by side with those living in poverty.

4.02pm BST

The Scottish National Party says Bank of England governor Mark Carney delivered a "blunt Brexit reality check" when he made his annual Mansion House speech this morning.

Stewart Hosie MP:

Today the governor of the Bank of England confirmed that Brexit is beginning to bite hard - and that our economy and people's wages are bearing the brunt. His speech paints an extremely depressing picture.

It is fundamentally unfair, when Scotland voted expressly against this eventuality, that the Tories continue to drag us towards the hard Brexit cliff edge, putting jobs and growth at risk.

3.44pm BST

Jasper Lawler, senior market analyst at London Capital Group, has given his take on the latest market moves.

Here in the UK...

The FTSE 100 erased early forex-induced gains by the afternoon when energy sector shares slumped alongside the price of oil. Investors were also weighing up the implications of fraud charges against former Barclays executives.

Broader stock markets have been weathering the three-week slide in the oil price on the assumption prices will stay within the price range seen over the past 12 months. The further we move below $50 per barrel, the more worrisome the bruising taken by oil prices gets for stocks.

Stocks in the US turned lower in early trading. Another day of record highs might be scuppered by concern around the persistent downtrend in oil and other commodity prices.

Apart from sending Amazon shares to new stratospheric levels, the deal to buy Whole Foods has been a negative force on the US stock market.

3.34pm BST

US markets are slightly down in early trading:

3.02pm BST

Elsewhere in Europe, major markets are mixed.

2.50pm BST

A weaker pound is often a plus for the FTSE 100 where companies tend to be internationally focused.

It isn't the case at the moment however as a falling oil price in dragging down commodity stocks. Brent crude is down 2.6% at $45.68 a barrel.

2.34pm BST

Labour MP Chuka Umunna has commented on Philip Hammond's Mansion House speech.

The chancellor is absolutely right that nobody voted in the referendum to become poorer. That is why it is vital that the government negotiates a Brexit deal that puts jobs and our economy first.

To do so, the government needs to recognise that it cannot continue to threaten a Brexit with no deal at all. And they should reopen the possibility of keeping Britain in the single market and customs union, which would be the best option for our economy.

1.56pm BST

Time for a recap:

The pound has fallen sharply after Bank of England governor Mark Carney argued against raising UK interest rates.

From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment.

In the coming months, I would like to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and more generally, how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations.

1.36pm BST

FXTM Research Analyst Lukman Otunuga says concerns over Brexit are weighing on the pound.

That's on top of Mark Carney's speech arguing against raising UK interest rates anytime soon.

Sterling was in trouble during Tuesday's trading session with prices tumbling to a weekly low at 1.266 after Mark Carney suggested that interest rates should be kept on hold amid Brexit uncertainty.

It is becoming clear that the rising fears of Brexit negotiations negatively impacting economic growth continues to weigh heavily on sentiment while prolonged periods of uncertainty has ensured Pound weakness remains a recurrent theme.

1.22pm BST

The pound is falling further against the euro too, down almost one eurocent at a1.134.

That's a one-week low, and close to the eight-month low of a1.1276 hit after June's UK general election.

12.30pm BST

Rating agency Standard & Poor's have warned that it could downgrade the UK before the terms of the Brexit deal are known, putting even more pressure on the pound.

S&P sovereign ratings chief Moritz Kraemer told Reuters that S&P needn't wait until the negotiations have been concluded in 2019.

"No, we don't have to wait."

"We will review the UK every six months... and if necessary more often...

12.19pm BST

Britain's carmakers have added their weight to calls for Britain to agree a transition deal after it leaves the EU.

The Society of Motor Manufacturers and Traders warned that a "cliff-edge" Brexit was the worst possible outcome for the automotive industry.

"We accept that we are leaving the European Union and we share the desire for that departure to be a success. But our biggest fear is that, in two years' time, we fall off a cliff edge - no deal, outside the single market and customs union and trading on inferior WTO terms.

"This would undermine our competitiveness and our ability to attract the investment that is critical to future growth."

11.54am BST

Tesco is busy apologising to customers caught up in its home delivery problems.

We're currently experiencing an IT issue which is affecting some Grocery Home Shopping orders.

"We're working hard to fix this problem and apologise to customers for any inconvenience this may cause."

Hi Julia, we're working hard to contact all affected customers. Any orders cancelled due to system errors wouldn't have been charged. - Mike

Hi Donna, I am very sorry for any upset this has caused. Due to an unforeseen technical fault we were unable to process all of our orders.

11.23am BST

In other news....Tesco customers are reporting problems with the supermarket giant's home delivery service.

Many are complaining on social media that their orders have been cancelled.

Text at 10.17am cancelling an order that should have arrived by 10am. Pretty awful.

Come on @Tesco - order cancelled until tomorrow - not cool when full of stuff needed for a small baby

@Tesco you cancel an order and i have to ring to find out. Thanks very much cancel my delivery saver I'll shop at Sainsbury's

@Tesco had a message left saying order cancelled and now a text saying delivery between 11 & 12???Am I getting shopping or not?

11.05am BST

Here's Paresh Davdra, CEO and Co-Founder of RationalFX, on Mark Carney and Philip Hammond's speeches this morning:

For analysts who were awaiting Carney's response to the BoE policy meeting last week, this announcement has dampened expectations of a significant policy change in the near future, with the governor citing low wage growth and mixed signals on consumer spending as the reasons for his decision.

There were some positives for investors from Hammond however, as he proposed arrangements for a transitionary period during the Brexit process and beyond which would see the customs union rules remain in place for the UK until new rules are implemented and other measures agreed that would protect the city and prevent disruption."

10.52am BST

Taken at face value, Mark Carney's insistence that interest rates would stay at rock bottom levels until the smoke had cleared from the Brexit talks was quite a rebuke to colleagues who voted for a rate rise only last week.

The Bank of England governor was in combative mood as he listed the many reasons for keeping the base rate at 0.25%, not least the febrile atmosphere inside City trading rooms.

10.40am BST

The drop in the pound has pushed up the value of multinational companies listed in London, as their overseas earnings are now more valuable.

10.32am BST

Carney's caution suggests that UK interest rates will remain at their current record low throughout 2017, and possibly until 2019, says Howard Archer of the EY Item Club.

"Mark Carney's cautious stance fuels our belief that interest rates will not be rising any time soon, given a stuttering UK economy and uncertainties over its outlook....

"We maintain the view that the Bank of England will hold off from raising interest rates in 2017. A tightening in 2018 also looks highly questionable given the cloudy outlook

10.31am BST

Guardian Business has launched a daily email.

Besides the key news headlines that you'd expect, there's an at-a-glance agenda of the day's main events, insightful opinion pieces and a quality feature to sink your teeth into each day.

10.23am BST

Mark Carney has "emphatically" distanced himself from the three hawkish MPC members who voted to raise interest rates from 0.25% to 0.5% last week.

So says Sam Hill of Royal Bank of Canada.

Carney's reference to the "coming months" implies that his vote for an unchanged policy stance is set to prevail at the August Inflation Report, and beyond whilst these uncertainties are resolved.

Whilst there are still many members we haven't heard from since the election purdah period ended (Haldane comments will be published tomorrow), it is significant that the Governor has now shown that the range of views on the Committee is broad, with his own being distinctly different to those who voted for a hike last week.

10.10am BST

Mark Carney comments come just a week after UK inflation rate jumped to 2.9%, well over the Bank's 2% target, and much faster than wages.

So if the Bank resists pressure to raise interest rates to curb inflation, workers may suffer falling real wages for even longer.

This morning's comments are important because they suggest that the Bank of England will look through the period of high inflation, headline CPI is running at 2.9%, blaming the rise on the sharp drop in sterling last year.

This could spell more woe for the UK consumer, if the BOE is not going to take action to bring down prices, this could keep the squeeze on pay packets for some time.

In the very short term we are looking at $1.2650 - the bottom of the range from the last 10-days - if we break below here it would be a short-term bearish development."

10.03am BST

Mark Carney has laid a "a thick layer of dovishness" over the City today, says Neil Wilson of ETX Capital.

He writes:

Carney's warning that 'now is not the time' to tighten should hardly be a surprise, given his record of favouring looser monetary policy, but it does reiterate the MPC's preference for looking through the current high levels of inflation for the time being.

There are plenty who think that the Bank's decision to cut last summer following the Brexit vote was folly and rising inflation offers a chance to correct that 'error'. However the departure of arch-hawk Kristin Forbes leaves those calling for tightening in a greater minority than before

9.42am BST

This is from Alpesh Paleja, the CBI's principal economist:

Carney not close to voting for a rate rise, and churn on the #MPC could see a shift in balance of views. Also, loving the cake metaphor! pic.twitter.com/r0CEUG1nda

9.37am BST

Mark Carney's comments show that the Bank of England is not inching close to a rate hike, says Mike Bird of the WSJ:

Not a huge mkt reaction to Carney, off about 0.5% vs a & $. Confirmation if any needed that 3 hike votes don't reflect growing BOE mood pic.twitter.com/z3wJIjQ3Pc

Carney much starker than Chancellor on imp. of transitional arrangements. Wd be, as BoE has asked fin. firms for contigency plans by July 14

#Brexit negotiations will test the U.K.'s ability to deliver an economy that works for all says Mark Carney at Mansion House breakfast #news

Mark Carney on rising interest rates: "Now is not yet the time to begin that adjustment" #mansionhouse #news

Mark Carney mocks Boris: "Before long we'll find out the extent to which Brexit is a gentle stroll to a land of cake and consumption"

Carney's got jokes pic.twitter.com/UeRNBgBBaE

9.30am BST

Apologies, there was a daft typo in that earlier entry about the pound.

To be clear, the pound has fallen to $1.2675, a one-week low, down from $1.275 before Mark Carney's speech hit the wires.

9.19am BST

Carney concludes his speech by questioning whether Brexit will be a cakewalk - a mischievous nod to Brexiteers who argued that Britain can 'have its cake and eat it' after it leaves the EU.

"Depending on whether and when any transition arrangement can be agreed, firms on either side of the channel may soon need to activate contingency plans.

"Before long, we will all begin to find out the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption."

9.12am BST

Carney has a chilly warning for Britons -- Brexit is going to hurt the economy, and he can't stop that happening.

However, the Bank can balance how this pain is shared; either through unemployment, or inflation, depending on how it sets interest rates.

Monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU. But it can influence how this hit to incomes is distributed between job losses and price rises.

9.08am BST

Carney has also warned that Britain will suffer badly if the City of London faces higher barriers to trade:

One million people across this country work in financial services. The industry contributes 7% of output and pays taxes that cover almost two thirds of the cost of the NHS. At a time when the UK is running a 5% current account deficit, financial services runs a 1.5% trade surplus with Europe alone. The entire service sector runs a 5% surplus with the world and employs 85% of UK workers.

We could take these realities for granted. And it would be all too easy to give into protectionism. But as we learned in the 1930s, that road leads neither to equity nor prosperity. Raising barriers to trade disproportionately hurts the least well off through higher prices and fewer opportunities.

9.07am BST

Carney is also warning against the creeping tide of protectionism, saying that stronger trade is the key to boosting global growth.

The governor says countries need to look outwards, not impose new barriers.

The G20 faces a choice - between levelling down by putting more restrictions on goods trade, or levelling up by liberalising trade in services.

Evidence from within countries suggests that there may be substantial scope to increase trade in services if barriers are removed. For example, in Canada - one of the few countries to track trade flows within its borders - services account for around 50% of all inter-provincial trade compared with only 25% of Canada's international exports. If Canada were able to replicate the pattern of trade within its borders with other countries then services exports would triple.

8.49am BST

Breaking: Sterling has fallen sharply to a one-week low as Mark Carney declares that Britain isn't ready for higher interest rates.

The pound shed half a cent to $1.2675 against the US dollar, and is down against the euro too.

Different members of the MPC will understandably have different views about the outlook and therefore on the potential timing of any Bank Rate increase. But all expect that any changes would be limited in scope and gradual in pace.

8.44am BST

Now Mark Carney is on his feet.

The Bank of England governor begins his speech by touching on the tragic events of recent weeks, which have reminded us of the "fine balance between hope and despair".

Despair at the murder of Jo Cox [one year ago last week]. Hope in her remarkable life of service - an inspiration that lives on in her family, friends, colleagues and many admirers.

Despair at the terrorist attacks in Manchester, Borough Market and Finsbury Park. Despair at the tragedy of Grenfell Tower.

8.35am BST

The key message from Philip Hammond today is that Britain can achieve a Brexit that works for the people.

But it must have four strands:

8.32am BST

Hammond fires a warning shot at those who want to take EU derivatives trading out of London.

This will lead to a lower-quality, higher-priced financial services, he warns.

8.27am BST

As expected, Hammond says Britain will almost certainly need an implementation period after Brexit, so that customs border arrangements can continue.

Ireland's land border must stay open and freeflowing too, he continues -- a very hot issue, as Theresa May continues to negotiate with Northern Ireland's DUP party.

8.25am BST

On trade, Hammond says Britain needs to be able to trade effectively with EU members after Brexit.

And on migration, the chancellor reads from the (notorious) Conservative manifesto that Britain needs to keep recruiting the "brightest and the best from around the world".

8.23am BST

Britain is tired of austerity after seven years of it, the chancellor continues - perhaps a nod that he will loosen the pursestrings in the autumn budget.

But he is still committing to eliminating the budget deficit by the end of the next decade.

8.20am BST

Onto fiscal issues.

Hammond says the Conservatives are committed to keeping taxes as low as possible, to encourage growth.

8.16am BST

Hammond now turns to Brexit, saying that there is much work to do.

But the UK has a solid foundation, he argues. It was one of the fastest growing G7 economies in 2016.

8.14am BST

Philip Hammond is speaking now.

He begins by thanking the City of London corporation for rescheduling today's event, after the appalling tragedy that was unfolding at Grenfell Tower.

We must also get to the bottom of the failure at Grenfell and take decisive action to make sure nothing like this happens again.

8.11am BST

You should be able to watch the Mansion House speeches on the TV news. Bloomberg are streaming it.

8.08am BST

Bloomberg expect Hammond to make the case for a softer Brexit that doesn't cause as much damage to the economy.

8.04am BST

The room at Mansion House is filling up nicely, to hear from Hammond and Carney.

Helena Morrissey, head of personal investing at LGIM and a driving force to get more women into the boardroom, is there.

On my way to Mansion House to hear the Chancellor. I'm assuming we'll be served "full English", even in this weather. Maybe no snuff though.

Off to Mansion House to hear @PhilipHammondUK set out how we improve UK productivity, address regional inbalances, & continue jobs growth

On way to listen to @PhilipHammondUK speech at Mansion House - worth an early start!

7.43am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The great and the good of the City of London are heading to Mansion House this morning, to hear from Bank of England governor Mark Carney and chancellor Philip Hammond.

As a reminder, the rescheduled release of BoE Governor Carney's Mansion House Speech, following the 5 - 3 vote, expected at 8.30BST

Hammond had looked set to lose his job until May's election flop. He has now re-emerged as big business' leading proponent in government and might provide more details on Tuesday on how he thinks the two-year Brexit process should run.

Hammond may also give more details of his budget plans after saying on Sunday that he was "not deaf" to the weariness of voters to nearly a decade of spending cuts for many services and tight controls on public sector pay.

BoE Carney & Chancellor Hammond deliver the rescheduled Mansion House speech this morning over breakfast so we are expecting early comments

SFO has charged Barclays and four individuals with conspiracy to commit fraud and the provision of unlawful financial assistance

The four former Barclays execs charged are John Varley, Roger Jenkins, Thomas Kalaris and Richard Boath.

There is no immediate reaction from the bank or the former bankers

Hang on - is there another country called Argentina? https://t.co/uDdkCKiHSi pic.twitter.com/CECfofNJit

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