BoE’s Policy Meeting on Investors’ Radar
The Halifax report released earlier today showed that house prices in the UK eased for the three months to December, for a fifth straight month. The focus of investors now shifts to the BoE’s policy meeting later today where the mixed voting pattern among policymakers is expected to remain unchanged. In the Euro zone, retail sales and producer price inflation reports will be eyed for further direction to the Euro after soft factory orders in Germany weighed on the common currency earlier today.
Across the Atlantic, following yesterday’s upbeat ADP private sector employment and trade reports, traders now await the official labour market report tomorrow to gauge the state of the job market in the US.
Pound Sterling – UK Markets
In the absence of crucial macro updates in the UK today, focus among traders is likely to be centred on the BoE’s policy meeting scheduled later today. The central bank is anticipated to keep its interest rate unchanged and maintain its asset purchase facility at £375 billion. Two BoE policymakers, Ian McCafferty and Martin Weale, who continued to vote for an immediate interest rate rise last month are expected to retain their hawkish stance. However, with recent domestic economic data points showing signs of softening across various segments of the economy, prospects of other MPC members joining the bandwagon of an immediate interest rate rise seem unlikely. Investors will look for cues from this meeting to gauge the possible timing of an interest rate rise, especially amid signs that Britain’s inflation has started to find some support from the recent upsurge in domestic wage rates.
This morning, Sterling has continued to trade on a weak footing against the greenback. Data released sometime back showed that house price growth in the UK slowed for the three months ended December, for a fifth straight time.
US Dollar – US Markets
The ADP employment report revealed yesterday that the number of new jobs in the US private sector were stronger than anticipated for December. This print showed that a major chunk of payrolls were added among small businesses which helped total hiring across domestic firms to reach its highest level in the last six months. However, considering that the recent ISM surveys indicated that domestic activity slowed, investors will eye tomorrow’s official labour market report in the US to confirm if job growth was robust for December. Additionally, another report showed that trade deficit in the US narrowed more than expected for November as imports reduced, led by a lower oil import bill. Meanwhile, the greenback failed to retain its early session gains against its key peers following the release of yesterday’s data. Separately, the minutes of the US Fed’s latest policy meeting revealed that the central bank will not start raising rates before April 2015.
This morning the US Dollar is trading higher against its key peers. Later today, traders will eye initial jobless claimants’ data in the US for further direction.
Euro – European Markets
The Euro is trading on a weaker footing against the US Dollar this morning after German factory orders dropped more than anticipated for November. Going forward, retail sales and producer price inflation readings scheduled later today in the Euro zone are likely to keep Euro traders interested for further direction to risk appetite.
The Euro touched its multi-year low against the greenback yesterday after preliminary inflation data released in the Euro zone revealed that consumer prices in the region dropped for the first time since October 2009, as global oil prices continued to fall. This report strengthened hopes that the ECB will unleash new quantitative easing measures to purchase government bonds in its upcoming policy meeting. Meanwhile, the core measure of Euro zone’s inflation showed an unexpected rise, easing some concerns. Additionally, another survey showed that Germany’s unemployment rate dropped unexpectedly to a record low level after job additions in the economy were stronger than expected for December. Amid these mixed economic updates, the Euro pared some of its early session losses against the US Dollar yesterday.
Other Currencies – Highlights
The Aussie Dollar nudged higher against the greenback today and rose above the 0.81 mark, paring its yesterday’s losses. Data released earlier today showed that the number of building approvals in Australia climbed unexpectedly for November as demand for apartment dwellings remained buoyed. This print eased concerns that a boom in Australia’s construction sector has reached its peak and offered some support to Reserve Bank of Australia’s (RBA) recent efforts of stimulating activity across the non-mining sectors in the economy. Moving ahead, investors will continue to eye for hints from the RBA to gauge if the central bank plans to cut interest rates in the near future to boost economic growth in the nation.
Going forward, market participants will keenly eye construction performance index later today and retail sales numbers early tomorrow for further direction to the Aussie Dollar against the majors. Additionally, with the crucial labour market data scheduled in the US tomorrow, the Aussie Dollar is likely to witness some volatility against the greenback in tomorrow’s trading session.