Watch this man – Mark Carney

Just four days into his office as the Governor of Bank of England, Mark Carney has left an indelible mark on the  Bank of England (BOE).

The first foreigner to be appointed as the Governor of the 319 year old institution, Mark Carney stood out from day one as he took the tube to work like a commoner.  Carney is a citizen of Canada and was the head of the Canadian Central Bank before crossing the Atlantic.

On Thursday, the Monetary Policy Committee (MPC) of the Bank of England held the interest rates steady and issued a statement that it normally does not do.

The usual note would include the rate of interest and any change in the QE that the bank has planned. But this time there was a commentary on the state of the economy, something that the BOE has never done earlier. He said that “in the United Kingdom, there have been further signs that a recovery is in train, although it remains weak by historical standards and a degree of slack is expected to persist for some time,” .

He has promised to make a second deviation from the past at the next meeting in August. And that is to give guidance on rates. He will write to the Chancellor of the Exchequer to explore this possibility.

The markets were positively surprised by these developments.

The FTSE 100 rocketed up 3.1% to 6,421.67. The sharp rebound came on the heels of a 1.3% drop in the FTSE on Wednesday. 

The Stoxx Europe 600 index climbed 3% as Draghi promised to hold rates for a considerable period of time or even go lower if the situation so demanded.

The British pound dropped 1.3% against the U.S. dollar to $1.50710, which was the biggest drop since February. The Euro also weakened against the Dollar.

Transatlantic rift in views

The U.S. Federal Reserve and the duo of ECB and BOE are in fact on different shores of the pond, physically and even in their policies.

While the Fed is in the process of taking the first step on the long road of unwinding the easy money policy, both the BOE and the ECB are assuring their economies that they are willing to hold rates low for a considerable period of time.

The difference in approach is understandable as they are in different stages of recovery. The EU has its own problems to cater to in the form of troubling peripheral countries, the UK has just averted a recession. Its economy grew by a meagre 0.3% in the first quarter of this year.

But the collective wisdom of the two  head of Central banks to promise continued lower rates for some time to come gives the market bulls a straw to cling on to their bullish bets, though it may not in any way impact the thinking of the U.S. Fed which any way will give importance to its own economic data.

Carney will shine

Unlike the U.S. Federal Reserve or the ECB, the BOE Governor is  relatively short on ammunition. He cannot fire from the hip as Bernanke can or Draghi can to a certain extent.

But take it from me that what he lacks in financial strength, he will make up with his intelligence and use of words.

Central Bank trackers have one more character to watch for