BoE Chief Speaks Ahead of BoE Decision on Thursday
The Bank of England (BoE) Governor Mark Carney is due to speak in front of the European Parliamentary Committee today, just three days before the UK officials meet up to announce its latest monetary policy decision. With no policy change anticipated by the BoE yet another time, the UK central bank will preferably wait to see how the outlook evolves before taking a call on the future path of interest rates.
In the meantime, with little on the economic front in the US, market participants will spend much of the day digesting events of the past week and getting themselves prepared ahead of next week’s critical Federal Reserve (Fed) rate decision meeting. In Europe, a positive run of numbers for the German economy continued with industrial output for October rebounding moderately.
Pound Sterling – UK Markets
On Friday, the Pound – US Dollar currency pair traded just above the 1.50 mark. The pair surrendered most of its gains after the widely eyed US jobs reports came in ahead of market expectations for November, adding to the likelihood of the Fed raising interest rates at its next week’s policy meeting.
In a quiet start to the new week, the BoE Governor Mark Carney’s testimony before the European Parliament Committee scheduled later today will be closely scrutinised for fresh indications on its interest rate path in the near term ahead of the UK central bank’s interest rate decision meeting on Thursday. Though no change is expected in monetary policy stance this week, it would be interesting to note whether any more of the hawkish members of the committee are inclined to join Ian McCafferty in favouring an imminent interest rate rise. In November, the BoE voted in another 8-1 decision to keep rates steady and the accompanying inflation report was on the dovish side. Datawise, UK’s industrial and construction output figures and goods trade data will be published in the coming days.
US Dollar – US Markets
The US Dollar regained some of the lost ground against the Euro on Friday after upbeat jobs data in the US cleared the final hurdle before the much anticipated US Fed’s monetary policy meeting on 15-16 December, when it is likely to raise interest rates for the first time in nearly a decade. Official figures showed that the number of people on the payrolls of all non-agricultural businesses rose more than estimated for November, reinforcing views that the US labour market is robust and helping recovery in the world’s largest economy. On the other hand, the unemployment rate for November remained unchanged and in line with market expectations. Average hourly earnings in the US grew at a slower pace in November, confirming that wage growth remains subdued. It is one of the signs of slack in the US labour market that the Fed is watching before implementing any change in its monetary policy.
This morning, the greenback remains buoyed against its major currency counterparts. On the macro front, labour market conditions index and consumer credit data will be the only two data prints to watch out for in the US docket later today.
Euro – European Markets
The shared currency has commenced the day on a weaker note against the US Dollar as market participants continue to digest last week’s unexpected action by the European Central Bank (ECB) on stimulus measures. Also traders continue to adjust to Friday’s optimistic print by the US non-farm payrolls which supported the greenback and have held the currency pair below the 1.09 mark amidst firm expectations of a Fed rate rise later this month.
Today, very little data of relevance is scheduled to be reported on the European calendar of which the German industrial output data released earlier in the day indicated that production slightly recovered in October albeit at a slower pace than what markets had anticipated. An increased rolling of capital goods production in October aided the industrial sector of Euro zone’s largest economy, while a decline in energy output held back overall industrial output. Today’s positive headline reading came after a severe drop in production in more than a year in September. The data, however, had limited influence on trading in the Euro against its key peers.
Other Currencies – Highlights
The Aussie Dollar is currently trading on a weaker footing against the greenback as currency traders seemed to have shrugged off recent domestic economic data releases and as Friday’s strong US jobs report continued to lend broad based support to the US Dollar today. Survey results by the Australian industry group and the Housing Industry Association published during the weekend revealed that expansion across Australia’s construction sector slowed down, but just escaped the contractionary territory in November as strong apartment construction offset weakness across housing, commercial and engineering activity.
Separately, another survey by the ANZ bank earlier in the day reported a rise in employment advertising for the fourth straight month in November. The lift in job ads signals strong employment growth in Australia. However, the nation’s unemployment rate could sway either ways until later this year as the labour market stages a rebound and tries to be a major driver of economic growth. Going forward, Australia’s employment figures are scheduled to be released later this week.