BoE Interest Rate Decision Meeting Awaited
Today is a quiet day for economic releases across the globe. After a report yesterday showed that UK services growth faltered in September, market attention now shifts towards the BoE's announcement of its monetary policy decision this Thursday. The MPC meeting will attract considerable interest as investors seek clarity on the timing of the rate rise. Ahead of that, investors will keep a tab on theUK’s manufacturing and industrial production figures, due for release tomorrow.In Europe, German factory orders declined for the second consecutive month in August, confoundingmarket expectations. Across the Atlantic, the nation’s trade balance data and IBD/TIPP economic optimism indicator will be eyed.
Pound Sterling – UK Markets
The Pound surrendered part of its gains against the US Dollar yesterday, after a survey report showed that growth in UK’s dominant services sector was the slowest in more than two years for September.Moreover, a PMI survey data had last week indicated that activity in Britain’s factories stagnated in September, suggesting that outlook for the economy is challenging as firms struggle against subdued demand in key export markets, strength of the home currency and weak demand in the energy sector.Weakness in the UK economy at the end of the third quarter might push BoE policymakers to adopt a cautious tone when they gather for their monthly monetary policy meeting later this week. While the BoE is anticipated to keep its benchmark interest rate unchanged this week, the manner in which the MPC votes would draw significant market interest and could impact rate rise expectations for the UK considerably. Prior to the BoE’s interest rate decision on Thursday, reports on UK’s industrial and manufacturing production scheduled tomorrow have the potential to lead to volatility in Sterling against its key peers.
US Dollar – US Markets
The US Dollar is trading lower against the shared currency this morning, with little economic data from the major economies to trigger volatility in the currency pair. Appetite for the greenback is soft at the moment following last week’s surprisingly weak report on payrolls for September which suggested that growth in the US economy has decelerated heading into the fourth quarter. Currency traders will continue to look or evidence whether the US economy is as weak as suggested by the latest job numbers. Later in the day, market participants will eye a pair of US economic reports, including trade data and a survey report assessing consumers’ outlook for economic conditions, for further direction. A positive surprise could lead to a return of the dollar rally.This week, investor focus will also be on minutes of the Federal Reserve’s September monetary policy meeting. Markets will particularly be sensitive to any signals which would provide an extra understanding on why the Fed stood pat last month and when in future it might start raising borrowing costs.
Euro – European Markets
The Euro – US Dollar currency pair is trading in a close range this morning, while hovering close to the 1.12 mark, as the common currency hardly responded to the disappointing German factory orders data.Industrial orders data in Germany that was released earlier in the day surprised markets on the down side as the gauge fell sharply in August, signalling that Euro zone’s largest economy was vulnerable to concerns surrounding slowing growth in China and other emerging markets. Official data revealed that German factory orders declined as both domestic and foreign demand deteriorated further in August. This was the second consecutive decrease in orders. Meanwhile, the impact of an emissions scandal at Volkswagen AG revealed last month threatens the outlook for Europe’s largest carmaker and raises doubts about German factory order numbers for September.Later in the day, a speech by European Central Bank Chief, Mario Draghi will be scrutinised for any potential signals to the ECB’s next move given the recent flow of weak data from the Euro zone and its peripheries.
Other Currencies – Highlights
The Swiss Franc has edged higher against the US Dollar, after economic data released earlier in the day indicated that Switzerland’s fall into the deflationary territory was stalled in September, suggesting a rise in price pressures in the nation. On an annual basis, consumer prices in Switzerland matched forecasts and remained steady following a drop recorded in August. The Swiss National Bank had last month lowered its forecast for inflation this year to minus 1.2%, reflecting the impact of lower oil prices. For 2016,the forecast was slashed from minus 0.4% to minus 0.5%. The central bank expects that the nation willreturn to positive inflation at the beginning of 2017.In the session ahead, trading in the US Dollar – Swiss Franc currency pair will be determined by US tradedata and IBD/TIPP’s economic optimism index. Going forward, investors will watch out for Switzerland’s unemployment rate, the lone important release in the nation this week, slated for release later this week.