BoE Rate Decision and Policy Statement in Focus
The Bank of England (BoE) is likely to unveil a new policy statement today and expectations are for the members to keep the benchmark interest rate on hold, hence focus will be on the accompanying communication about the recent economic and financial developments. Renewed global growth concerns and tumbling of commodity prices will likely force the BoE Governor to shelve plans of raising rates until at least the middle of the next year. On the data front, UK’s overall trade deficit widened more the market forecasts for October.
Across the Atlantic, the final major job release in the form of a weekly report on claims for unemployment benefits is due later today ahead of next week’s US central bank’s monetary policy meeting.
Pound Sterling – UK Markets
The just out data revealed that Britain’s goods trade deficit widened more than market estimates for October as imports rose at the fastest pace in nearly a year and as slowing global economic growth weighed on export demand. Exporters also struggled due to the strength of the Pound while imports jumped on higher demand for fuels and finished manufactured goods. The disappointing trade data has come after the official figures last month indicated that the UK GDP growth eased in the third quarter due to widening import – export gap. The worse than expected net trade and the deterioration in the manufacturing output data witnessed earlier in the week suggests that there will be little easing pressure on the BoE to raise interest rates at today’s meeting.
Sterling moved above the 1.50 mark against the US Dollar yesterday, rising for the first time in four consecutive trading sessions ahead of the UK central bank’s rate-setting meeting due today. Though the BoE is widely expected to keep rates unchanged, market focus will be on the accompanying monetary policy statement release to gauge any change in tone from their recent rhetoric.
US Dollar – US Markets
The US Dollar suffered a setback against the Euro and the Japanese Yen yesterday, amid speculation that a renewed risk-off in financial markets would coerce the Federal Reserve (Fed) to be less hawkish than expected in its next week’s critical policy-setting meeting. On the macro front, applications for US home mortgages rose in the previous week, as borrowers rushed to refinance before the Fed raises the borrowing rate in the coming week. In separate data, US wholesale inventories fell in October as traders increased efforts to reduce their accumulated stockpiles.
The greenback has regained some lost ground against the Euro this morning. In the US docket, investors will today eye the weekly numbers on jobless claims which will be the last major bit of employment data ahead of next Wednesday’s Fed interest rate announcement. The latest nonfarm payrolls certainly gave the Fed additional evidence to tighten its monetary policy. Today’s unemployment claims will offer more insights regarding job growth, with data on course to support an optimistic view of the labour market.
Euro – European Markets
The Euro has surrendered its initial gains against the US Dollar, with the currency pair slipping below the 1.10 mark this morning. Data released earlier today revealed that France’s industrial output unexpectedly grew in October, suggesting a modest recovery in the nation’s industrial sector in the final quarter. Meanwhile, consumer prices data in France slipped back into deflationary territory in November, weighed down by the recent route in crude oil prices. However, the shared currency budged a little against the majors following the release of the economic reports. With very little relevant data due for release in Europe today, the Euro – US Dollar currency pair could move further to the downside, but with limited momentum, as market participants await the Fed’s crucial interest rate decision meeting scheduled next week.
In other news, a member of the European Central Bank’s (ECB) governing council, Ewald Nowotny yesterday defended the central bank’s recent monetary policy decision. He stated that the ECB’s recent expansion of the accommodative policy measures were correct as inflation remained far below the central bank’s desired target.
Other Currencies – Highlights
Earlier today, the Aussie Dollar surged above the 0.73 mark against the greenback after the publication of a surprisingly upbeat employment data in Australia. Bucking the forecasts, the number of people with a job in November significantly added on to the gains recorded for the previous month. It was the strongest two-month period of jobs growth since December 1987 and January 1988. Data revealed that employment rose in parts of the economy which are not related to mining, a positive sign for the Australian economy that is transitioning away from its dependence on the mining sector. The unexpected increase in the number of jobs brought the official jobless rate to 5.8%, its lowest level in almost two years. The robust labour market data suggests that the Australian economy is strengthening, despite concerns of slowing growth in its major trading partner nation, China and amid a shift to industries unrelated to resources.
The Aussie Dollar has currently pulled back a little against the US Dollar, as investor focus is on next week’s significant Fed rate decision meeting