Britain’s Unemployment Rate Falls
The latest BoE policy meeting revealed that policymakers were unanimous in maintaining interest rates in the UK. Sterling lost ground against the majors following the release of today’s minutes, as investors overlooked the upbeat UK labour market report which showed that unemployment rate in the nation fell below 6% and growth in domestic income outpaced Britain’s inflation rate. With the ECB’s policy meeting scheduled tomorrow, the Pound-Euro pair could see a rebound amid expectations that the central bank might unleash an outright bond purchase programme in the Euro zone.
Across the Atlantic, market participants will eye today’s housing starts and building permits data to gain an insight into the health of the nation’s housing market.
Pound Sterling – UK Markets
Data just out has shown that unemployment rate in the UK fell below the 6% mark and growth in domestic wages picked up for the three months ended November. The report further revealed that the number of jobless claimants in the nation declined at a healthy pace for December. Meanwhile, the minutes of the most recent BoE’s policy minutes revealed today that two officials who had earlier voted in favour of an immediate rise in interest rates changed their policy stance, as low oil prices and deflationary headwinds from the Euro zone continued to weigh on Britain’s inflation. Considering that today’s job market print has offered evidence of declining labour market slack in Britain and with wages rising well above the nation’s inflation, it will be interesting to watch the stance of policymakers going forward.
The Pound lost ground against the majors following the release of today’s minutes. Going forward, investors in the Pound-Euro pair are likely to remain on their toes amid expectations that the ECB might announce quantitative easing measures in its tomorrow’s policy meeting.
US Dollar – US Markets
The greenback nudged lower against the Pound yesterday, despite the IMF upgrading its US economic growth forecast for 2014. Meanwhile, the NAHB housing market survey released yesterday showed that sentiment among US home builders deteriorated surprisingly for January. The survey further indicated that single-family home sales is expected to weaken for the next six months, amid anticipations that the Fed might raise interest rates later this year.
This morning, the US Dollar is trading on a weaker footing against the majors ahead of today’s housing starts and building permits numbers in the US. Both numbers are anticipated to show a rebound for December and strengthen hopes that activity in the US housing market is gaining momentum, particularly amid improving consumer confidence and robust labour market growth. Going forward, market participants will keep a tab on the Markit preliminary manufacturing PMI reading from the US later this week, to gain an early insight into the economy’s manufacturing health for January.
Euro – European Markets
In yesterday’s trading session, the Euro lost ground against the Pound, despite the ZEW economic sentiment survey released in Germany showing a more than expected improvement for January. The survey revealed that optimism in German financial markets remained supported by cheaper oil and a weaker Euro.
With little on the domestic macroeconomic front today, the common currency is trading on a firmer footing against the greenback this morning. Moving ahead, market participants are likely to remain focused on the ECB’s policy meeting tomorrow where the central bank is expected to launch a sovereign bond purchase programme in the Euro zone. Additionally, the European Commission’s preliminary survey scheduled later tomorrow is anticipated to show an improvement in morale among Euro zone consumers, amid expectations of more stimulus measures from the ECB. Furthermore, with the preliminary manufacturing and services PMI readings scheduled for release across key European nations later this week, the Euro is likely to witness increased activity against its major peers going forward.
Other Currencies – Highlights
The New Zealand Dollar lost ground against the greenback in yesterday’s trading session and fell below the 0.77 mark. Later in the session, the Kiwi Dollar extended its losses against the US Dollar after a report released in New Zealand showed a more than expected fall in the nation’s consumer price inflation for the fourth quarter of 2014. Amid consumer price growth in New Zealand falling to a multi-year low, market participants remained concerned over the impact of low oil prices on the country’s inflation. Moreover, considering that New Zealand’s inflation dropped below the Reserve Bank of New Zealand’s 1% to 3% target range, investors’ expectations strengthened towards a delay in the timing of an interest rate rise in nation.
Going forward, traders will keep a tab on New Zealand’s business performance survey for December along with housing starts and building permits data in the US later today for further direction to the Kiwi Dollar-US Dollar pair.