Pound jumps after Haldane turns hawkish and UK deficit falls – as it happened
All the day's economic and financial news, including a new healthcheck on Britain's public finances
- Latest: Haldane says rates may rise this year
- Sterling hits $1.27
- Harrison: Is he trying to annoy Mark Carney?
Earlier;:
- UK deficit falls to 6.7bn in May
- Introduction: Oil prices hit by oversupply worries
- Analysts: Oil prices likely to keep falling
3.58pm BST
And finally....the latest US oil inventory figures are just out, showing that US crude and gasoline inventories fell last week.
The US Energy Information Administration reports that US oil stocks shrank by 2.5 million barrels, more than the 1.01 million which the markets had expected.
#EIA
Crude: -2.451M
Cushing: -1.080M
Gasoline: -0.578M
Distillates: 1.079M
Imports: 0.056M#oott
WTI crude pops after EIA says crude inventories fell by 2.5 million barrels https://t.co/XRuIHvLQ1J
3.43pm BST
The US housing market has strengthened unexpectedly last month, according to new figures.
Sales of US homes, excluding new builds, rose by 1.1% in May to an annual rate of 5.62 million sales.
US median home prices +5.8% to record $252,800 as existing home sales rise https://t.co/mE0pHiE1Yp pic.twitter.com/v8VLVuwZEj
3.28pm BST
Supermarket giant Tesco are back in the news again today, for the wrong reasons.
Tesco Bank's online banking service has suffered a glitch today, that has left some customer unable to access their accounts.
We apologise customers are currently unable to access online banking. We are working hard to resolve it.
2.21pm BST
Fawad Razaqzada, market analyst at Forex.com, says Andy Haldane's speech has been the main event of the morning.
Haldane's concerns about not waiting too long to normalise policy could help the pound strengthen against the euro in the next few weeks, he says - just in time for the summer holiday season!
Forget the Queen's Speech, it was all about Andy Haldane this morning. The pound jumped and the FTSE dropped after the Bank of England's chief economist and Monetary Policy Committee member said he's ready to vote for an increase in interest rates "relatively soon". This came as a major surprise because Mr Haldane has long been a known dove. He is going head-to-head against the Governor Mark Carney, who is fast losing support on his dovish stance. He said that "a partial withdrawal of the additional policy insurance the MPC put in place last year would be prudent relatively soon."
Mr Haldane said that the risk was that the Bank tightened its belt too late rather than too early. This is something which the Bank of Canada is also worried about and what the US Federal Reserve had long been wary of, and the European Central Bank better be ready for. The latter came across pretty dovish at its last meeting. With the BoE turning hawkish and ECB remaining dovish, the EUR/GBP could come under pressure in the coming days and weeks.
2.16pm BST
Haldane's hawkishness has helped the pound to recovery almost all of the losses suffered yesterday, after BoE governor Mark Carney explained why interest rates ought to remain at record lows.
#BOE #Carney / #Haldane whiplash reflected in sterling volatility: ruled out rate rise yday then justify hikes today https://t.co/NZZcT6hfLV pic.twitter.com/dG5dZqFmIP
1.51pm BST
Lena Komileva of G+ Economics reckons there's now a 50% chance of a UK interest rate rise this year.
She says:
The growing split on the MPC signals a much higher risk of tightening this year than previously expected in the markets.
With two new members joining the MPC in the second half of the year, an active policy debate on the merits of tightening, against the optics of a strong inflation overshoot, overheating consumer credit growth, and a tight labour market, may well tilt the vote in favour of a rate hike by the year-end.
1.37pm BST
The Haldane effect has pushed the pound back over $1.27, a whole cent higher than this morning's lows.
1.04pm BST
Following Andy Haldane's speech, there are now at least four Bank of England policymakers who are likely to vote for rate rises this year.
However... one of them, Kristin Forbes, leaves on 30 June.
Proof that there's no such thing as a boring Haldane speech - https://t.co/OKd5ocBxk4 pic.twitter.com/IiP7lfME6D
Matters for 2 reasons: 1. I had Haldane down as an ultra-dove & have had since 2014.
2. Significant if a Bank "insider" is moving this way.
12.28pm BST
Andy Haldane's hint that UK interest rates may rise this year is particularly interesting as he had been seen as the most dovish policymaker at the Bank of England.
With one speech, Haldane has shed his dovish feathers in favour of a hawkish summer plumage.
Dovish Haldane moving close to calling for hike.
Big contrast to Carney yesterday.
Dissension in the ranks chaps? #gbp
...worth bearing in mind that Haldane had a flip-flop on raising rates in 2014. Could well happen again if the data comes in worse... pic.twitter.com/nANApfjZBe
The MPC member with the highest volatility. Best guide to Andy's positions seems to be what will most annoy the Governor... https://t.co/Qc1US0Rnbx
So is this the BOE facing the EM central bank trap? forcing to talk/push up the FX to limit inflation?
GBP desks following the Haldane speech pic.twitter.com/x6RPzS0e8y
12.01pm BST
Newsflash: The Bank of England's chief economist has declared that UK interest rates may have to rise later this year.
Having weighed the evidence, I think that the balance of risks associated with tightening "too early", on the one hand, and "too late", on the other, has swung materially towards the latter in the past six to nine months. The risks of tightening "too early" have shrunk as growth and, to lesser extent, inflation have shown greater resilience than expected. And if policy tightened "too late", this could result in a much steeper path of rate rises later on, contrary to the MPC's collective expectation that Bank Rate would increase 'at a gradual pace and to a limited extent'.
As the balance point between these risks has shifted over the past 9 months, that has left me judging that a partial withdrawal of the additional policy insurance the MPC put in place last year would be prudent relatively soon, provided the data come in broadly as expected in the period ahead.
11.47am BST
Back in the markets, shares in doorstep lender Provident Financial have slumped by 16% this morning after a shock profits warning.
The FTSE 100-listed lender admitted last night that its recent reorganisation - which eliminated around 2,000 - had caused more disruption than expected.
"We didn't get it right. The incentives we had in place and the other management actions and communications that were there, were not sufficient to retain the number of agents that we anticipated."
Another canary in the coal mine here. Profit warning from an unsecured doorstep lender. https://t.co/6L3X6w6m7N
11.26am BST
The pound has recovered its early losses following this morning's public finance figures.
Sterling is back at $1.263, as traders watch for any surprises in the Queen's Speech, which begins shortly.
10.52am BST
John Hawksworth, PwC chief economist, says today's public finance figures are a boost to Philip Hammond, at a crucial time.
"Today's public finance data brought some good news for the Chancellor as estimated borrowing was revised down by around 2 billion in the last financial year and a further 1 billion in April.
"Taking April and May together, the deficit of around 16 billion was very similar to the same two months last year, whereas the OBR had forecast that borrowing would rise this financial year as one-off favourable factors unwound.
The economy is slowing and considerable uncertainties remain around the outcome of the Brexit negotiations. At the same time, political pressures for higher spending on health, social care, education, policing, social housing and public pay more generally have increased.
"The Chancellor therefore still faces some tough challenges ahead if he is to meet his target of a balanced budget by 2025. But his interim target of getting the structural budget deficit below 2% of GDP by 2020/21 looks much easier to achieve and gives him some room for manoeuvre on tax and spending over the next few years."
10.50am BST
The 300m drop in the deficit in May shows that the UK public finances started the year on a solid footing, says Capital Economics.
However, they also expect total borrowing to rise during this financial year.
The strong revenue growth partly reflected a 4.3% rise in VAT receipts - perhaps a sign that consumer spending growth hasn't slowed too sharply recently.
That said, we wouldn't read too much into the borrowing figures for the first few months of the fiscal year as they are based on a significant amount of forecast data. Accordingly, we still think that borrowing for the fiscal year as a whole will increase by several billion pounds (the OBR expects a 7bn rise) as a number of one-off factors that lowered borrowing in 2016-17 unwind.
10.14am BST
Britain's finance ministry has welcomed the drop in borrowing last month, but admitted that the task of repairing the public finances isn't complete.
'We have reduced the deficit by three-quarters since 2010 but there is still further to go.
We are committed to bringing the public finances back to balance by the middle of next decade, building a stronger economy that can deliver higher living standards for people across the country.'
10.03am BST
Here's some reaction to the news that Britain's deficit fell to 6.7bn last month:
Economist Rupert Seggins points out that UK public sector borrowing has dropped, a little, so far this financial year:
UK public sector borrowing down 100mn in the first two months of the year. Early doors yet, but lowest borrowing start to year since 2008. pic.twitter.com/I7sz5Ng8Uu
UK deficit fell in May, but after a long period of gradual improvements, expected headwinds will put renewed pressure on public finances.
Slight y/y fall in May #UK public borrowing helped by record #VAT receipts for May; likely lagged effect from Apr spike in #retail sales
9.51am BST
Today's public finance report also shows that Britain's total national debt is now 1.737 trillion -- or 86.5% of annual GDP.
UK Net debt (PSND Ex) 1,737.3bn at end of May 2017, equivalent to 86.5% of the value of the economy (GDP) https://t.co/95iodM9Nv7 pic.twitter.com/OVLVLjGmga
9.47am BST
Britain's budget deficit fell by 300m in May, giving a glimmer of hope to the UK government as it wrestles with Brexit.
New figures from the Office for National Statistics show that the UK borrowed 6.7bn to balance the books last month.
Good News! UK Public sector net borrowing decreased by 0.3 billion to 6.7 billion in May 2017, compared with May 2016;
9.32am BST
It's been an exciting day on the Chinese stock market.
9.11am BST
Jamie McGeever of Reuters shows how the pound has fallen back to two-month lows since the general election delivered a hung parliament.
Sterling falls back below $1.26. Strong and stable etc... pic.twitter.com/hQeeAVvipF
8.55am BST
Breaking! The pound has slipped to a fresh two-month low against the US dollar.
Sterling has just fallen below $1.26 for the first time since mid-April, when Theresa May took the fateful decision to call a general election.
Sterling back below $1.26 for the first time since the big election announcement rally. pic.twitter.com/XMZNr4gCGD
Sterling also had a miserable open this Wednesday, the pound falling 0.3% against the dollar and 0.2% against the euro.
That's because, despite the state opening of parliament being just a few hours away, Theresa May is yet to fully secure the support of the DUP, the Irish party unhappy with what they see as a lack of respect from certain sections of the Conservatives.
Related: Theresa May under pressure as DUP says: 'Show some respect'
8.46am BST
Opec's highly publicised production cuts have actually turned into a win for US oil producers.
American shale oil firms have raised their own output as the oil price recovered earlier this year, undermining efforts to cut the global glut of oil (leading to this week's price falls).
U.S. producers ramped up production when the world was already swimming in oil as OPEC members, Russia and other producing nations curtailed output.
U.S. oil production is up 7.3% to 9.3 million barrels a day since OPEC announced plans in November to cut output, and the number of active rigs in the U.S. is at a two-year high.
Oil returns to bear market as output cut deal becomes "OPEC failure and U.S. production win" https://t.co/XF3QWQI5NI #oott pic.twitter.com/KGhq84sb3I
8.42am BST
Oil prices are coming under more pressure this morning, knocking 1% off the price of Brent crude and Nymex.
Never seen sentiment this bad for #oil says Amrita Sen, Chief Oil Analyst of Energy Aspects on @SquawkBoxEurope
8.30am BST
European stock markets are falling in early trading, as oil's drop worries investors.
The FTSE 100 has shed 22 points, or 0.3%. BP and Royal Dutch Shell are among the big fallers, down over 1% each.
8.12am BST
Big news from America: Uber chief executive Travis Kalanick has resigned after a series of scandals at the ride-hailing business he co-founded in 2009.
"I love Uber more than anything in the world and at this difficult moment in my personal life I have accepted the investors request to step aside so that Uber can go back to building rather than be distracted with another fight."
Related: Embattled Uber CEO Travis Kalanick takes indefinite leave of absence
8.09am BST
Nordic bank Danske say that oil's slide into a bear market is worrying investors worldwide:
Danske Daily: focus on impact of falling #oilprices and #UKPolitics https://t.co/bLhkYLsrvu pic.twitter.com/ChcYnS2ijP
Oil's ongoing oversupply woes reached an ear-piercing crescendo during Tuesday's trading session as WTI Crude plunged into a bear market after growing signs of rising production across the globe. WTI Crude was already extremely sensitive and vulnerable to losses amid the bearish sentiment with reports of an unexpected supply increase by Libya sending prices below $43.
Although OPEC initially displayed good intentions when it exempted some members from the production cuts, this has come back to haunt them with more production from Libya, Nigeria, and Iran. With the bias towards oil heavily tilted to the downside, further losses should be expected as bears exploit persistent oversupply concerns to ruthlessly attack the commodity.
A renewed plunge in commodity prices would be a negative for global trade #oil pic.twitter.com/53qqem5vTw
The risk is we could see further declines, particularly if shale producers continue to add rigs, and demand continues to slow in Asia, and there are no further supply disruptions.
The key support levels sit down at the November lows at $43 on Brent and $42 on US WTI, which if they give way $40 could come into view very quickly indeed and drag equity markets down with them, especially if today's weekly inventory data disappoints.
7.39am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Traders are edgy this morning after the oil prices tumbled to seven-month lows.
Oil enters a bear market, again. Good morning Asia pic.twitter.com/2YBS9ihxy1
High levels of storage -Oil price fell 2% officially entering bear market territory #gulfintelligence#oil&gas pic.twitter.com/N6XhSsIBJt
#Oil below $46 this am as even falling US stocks & stringent #OPEC #NOPEC compliance can't distract bears from inventory overhang #OOTT pic.twitter.com/ge3j9HDmI8
As for the black gold, investors are becoming a little anxious towards the rising production out of Libya, however, OPEC has stated it before that the production level out of Libya is already taken into account in the part of their production cut strategy. Saudi Arabia also reported higher export data on Tuesday.
It is important that not only production cuts are under control but also the export numbers as well.
Its understood there will be 8 Brexit related bills in Queens speech #maastrichtonstilts
Govt to shelve planned energy bill price cap in Queens Speech. Will instead become a consultation.
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