Zak Mir & Mark Carney’s inaugural day in office

As a happy coincidence, my day one as Editor of Spreadbet Magazine is also day one for the new Bank of England Governor Mark Carney. Unfortunately, I do not believe that among some 60 million Britons our Canadian Everton Football Club supporter was the best man for the job, any more than I believe that the man who labelled him as such, Chancellor George Osborne is the best man for his brief too!

The phrase that Mr Carney is the “best central banker of his generation” has been widely touted but,  given the role he is now tasked with is largely a smoke and mirrors routine in appeasing the financial markets these days, I would maintain that it is the ECB’s Mario Draghi who currently wears the crown. He managed to bluff the financial markets with his “irreversible” assurances regarding the single currency – quite an achievement given the PIIGS / Germany nightmare that persists still to this day.

Mark Carney – not me. More Hair!

So what of the UK and Swervin’ Mervyn’s successor? Much is currently being pinned on the idea that Carney will resume the current £375bn QE program.  It would however appear to me that after the Bernanke QE tapering hints of last month it may be the case that the great post financial crisis bond buying experiment needs a rethink. Government buying of this asset class does certainly offer breathing space to debtors, but its consequences appear to be flat lining growth followed by a bursting once the buying stops. In fact, the simplest solution to reviving an economy is to lower taxes – a point we learnt with the Fiscal Cliff debacle. Sadly, it would appear that many (European) Governments would rather destroy economies and even lose elections than put money directly back into people’s pockets. They prefer bankers to distribute cash via lending…..

As far as the run up to the July Bank of England meeting is concerned, it is often the case that we should keep a close eye on Sterling just prior to such announcements, and on this occasion it would appear that the price action is particularly telling. We are in the aftermath of a narrow bull trap from just above the key 200 day moving average at $1.57 just prior to “Helicopter” Ben’s mumbling news conference. Allegedly institutional funds were dumping the U.S. Dollar in the hope of a QE fudge. They jumped back in long with the UK currency losing some 5 cents in just a few sessions. The dividing line between correction and breakdown is ironically Friday’s $1.5166 floor for cable – also a March support line – and coming the day before the new Bank of England Governor started “work.”

The technical view would be that any sustained price action below the three month  support line could be a cue that there will indeed be action from Threadneedle Street this week. While it seems likely that Carney will simply sit on his hands over the summer – much below $1.52 could be the signal of a more proactive approach to kick starting the economy than we have become accustomed to.  Weaker Sterling towards $1.45 could be the initial consequence of our new saviour.