Pound moves slightly higher
Bloomberg News/LandovMark Carney, governor of the Bank of England, will discuss the latest inflation report at a hearing on Tuesday DMAMBMCMDMEMGPREVIEWZBZBRZDZDRZFZGZQZRZSZTZU
U.K. stocks struggled for direction early on Tuesday, a day after scoring an all-time closing high, as traders waited for fresh catalysts to give the market a kick.
One of those catalysts may come this morning, when several Bank of England members — including Governor Mark Carney — are due to speak before lawmakers on inflation and monetary policy.
What are markets doing?
The U.K.’s FTSE 100 index (^FTSE) was marginally higher at 7,862.77, but was swinging between small gains and losses.
The pound (GBPUSD) rose to $1.3443, from $1.3426 late Monday in New York.
What is driving the market?
Trading was subdued on Tuesday, as investors paused after pushing the London benchmark to a fresh record in the prior session. A major factor in the recent stock rally was the weakening pound, which slumped on the back of a rising dollar and fears over government infighting over Brexit.
The cabinet remains divided over whether the U.K. should remain in something similar to a customs union with the European Union to avoid a “hard” border in Ireland. The bitter row has spurred some Conservative MPs to reportedly push for an out-of-cycle election in the U.K. to break the negotiation deadlock and potentially oust Prime Minister Theresa May
However, Foreign Secretary Boris Johnson late Monday spoke out against holding a “snap” general election and said he stands by May. Johnson has been very vocal in his opposition to a customs union, whereas May has indicated her willingness to compromise to avoid a hard border in Ireland.
What is on Tuesday’s agenda?
Carney and three other BOE members are due appear at a Treasury Select Committee hearing at 10 a.m. London time, or 5 a.m. Eastern Time.
The central bank policy makers will discuss the recent inflation report, in which the BOE slashed its economic growth outlook and gave a somewhat confusing forecast for monetary policy.
What are strategists saying?
“We suspect that [the BOE hearing] will not bring any major new revelations about the monetary policy outlook in the U.K., with Carney likely to reiterate that some degree of policy tightening — about three [interest rate] hikes of 25bps apiece over the coming three years — will be required if the economy performs in line with their expectations,” analysts at Daiwa Capital Markets said in a note.
Shares of National Grid PLC (NG.L) fell 0.6% after the U.K. energy regulator Ofgem said it has opened an investigation into the company’s forecasting on the electricity market.
Sara Sjolin is a MarketWatch reporter based in London. Follow her on Twitter @sarasjolin.
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