The Bank of England’s (BoE) final monetary policy decision for 2016 is the highlight today and is scheduled to be held in a few hours. As the central bank is expected to maintain status quo on the policy decision, all eyes will be on the accompanying BoE meeting minutes. Investors will look for signs of any shift in the central bank’s neutral stance on the interest rates from its previous policy meeting.
In the UK, the Office for National Statistics revealed that the nation’s retail sales surprisingly advanced in November. Further, Eurozone’s flash Markit manufacturing PMI expanded at its fastest pace in more than five years in November, while services activity slowed in the same month. Moving to Germany, growth in manufacturing sector advanced at the fastest pace in nearly three years in November, while the services PMI expanded at a slower pace during the same month.
Pound Sterling – UK Markets
The Pound is trading lower against the US Dollar and higher against the Euro this morning. The just out data indicated that British retail sales unexpectedly rose in November, as Black Friday discounts boosted sales of electronics and household goods. Today, market attention will return to another central bank: the BoE and the monetary policy committee is widely anticipated to stand pat on interest rate. The meeting minutes will grab maximum attention as investors keenly look forward to the central bank’s next move on interest rates. It will be interesting to observe the central bank’s take on inflation, after a report released earlier in the week showed a modest uptick in UK’s annual inflation.
Yesterday, Sterling ended lower against the US Dollar, after the Federal Reserve raised its benchmark interest rate by 25 basis points in a widely-expected decision and adopted a hawkish tone in terms of rate increases going forward in 2017. Earlier in the session, the Pound had risen against the greenback after UK’s unemployment rate remained steady during the three months to October.
US Dollar – US Markets
The greenback strengthened against its major peers yesterday, after the US Federal Reserve’s (Fed) rate setting committee increased the key interest rate by a quarter point for the second time in a decade to a range of 0.50% to 0.75%, citing a decline in unemployment rate and rising wages in the US. Although this was widely anticipated, what surprised markets is the fact the central bank projected three interest rate increases in 2017, a more aggressive stance from two in September. On the data front, advance retail sales rose less than forecasts in November, indicating a pause in spending after robust gains in the previous two months. Moreover, industrial production retreated more than expected in November, due to a decline in utility and manufacturing output.
The US Dollar is trading higher against the Pound and the shared currency this morning, extending its previous session rally. Later today, market participants will keenly focus on the US consumer price index, Markit manufacturing PMI and weekly jobless claims data along with the NAHB housing market index.
Euro – European Markets
This morning, the Euro is trading lower against the Pound and the US Dollar. Data indicated that preliminary reading of the Eurozone’s manufacturing PMI surprisingly rose, while the region’s services PMI fell in November. Meanwhile, German manufacturing PMI accelerated to a 35-month high in November, steered by a rise in goods production and new orders. On the contrary, services PMI in the nation dropped more than anticipated during the same month. In France, both the manufacturing and service sector activities improved noticeably in December.
Yesterday, the shared currency ended lower against the greenback and slipped below the crucial 1.600 handle after the Fed’s rate rise and on the back of its hawkish tone for next year. Separately, a Eurostat report showed that Eurozone’s industrial production growth missed market expectations of a rebound in October. The output remained in negative territory for the second consecutive month led by a decline in production of non-durable consumer goods in the region.
Other Currencies – Highlights
The Australian Dollar is trading lower against the greenback this morning. Data released earlier in the session showed that the seasonally adjusted unemployment rate in Australia unexpectedly rose to 5.7% in November, its highest level since 2002. Nevertheless, Australians did find something to cheer about as the number of employed people surpassed expectations, led by a rise in full-time employment. Further, the increase in participation rate also added to a healthier labour market, bringing optimism to an economy that contracted last quarter and where consumer confidence has deteriorated. Moreover, Australian consumer inflation expectations improved in December, indicating deflationary pressures were starting to ease.
During the previous session, the Australian dollar ended lower against its US counterpart, as the US Dollar witnessed a bullish charge across the board, boosted by the US Fed’s first interest rate rise in a year while also flagging up to three rate rises for 2017. Looking ahead, the Reserve Bank of Australia’s December meeting minutes and Australia’s Westpac leading index are lined up for release next week.